by Calculated Risk on 5/05/2020 10:18:00 AM

The April ISM Non-manufacturing index was at 41.8%, down from 52.5% in March. The employment index decreased to 30.0%, from 47.0%. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: April 2020 Non-Manufacturing ISM Report On Business®

conomic activity in the non-manufacturing sector contracted in April for the first time since December 2009, ending a 122-month period of growth, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 41.8 percent, 10.7 percentage points lower than the March reading of 52.5 percent. This reading represents contraction in the non-manufacturing sector and is the NMI®'s lowest since March 2009 (40.1 percent). The Business Activity Index fell 22 percentage points from March's figure, registering 26 percent — the lowest reading for that index since the debut of the Non-Manufacturing ISM® Report On Business® in 1997. The New Orders Index registered 32.9 percent, 20 percentage points below the reading of 52.9 percent in March. The Employment Index decreased to 30 percent, 17 percentage points below the March reading of 47 percent.

"The Supplier Deliveries Index registered an all-time high of 78.3 percent, up 16.2 percentage points from the March reading of 62.1 percent, which limited the decrease in the composite NMI®. The Supplier Deliveries Index is one of four equally weighted subindexes that directly factor into the NMI®, along with Business Activity, New Orders and Employment. Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases. However, the combined 25.9-percentage point increase in March and April was primarily a product of supply problems related to the coronavirus (COVID-19) pandemic.
emphasis added

The headline index understated the weakness in the survey. The Supplier Deliveries index boosted the composite NMI, while other indexes hit record lows.

by Calculated Risk on 5/05/2020 08:55:00 AM

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

From CoreLogic: CoreLogic Reports March Home Prices Increased by 4.5% Year Over Year

CoreLogic® ... oday released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for March 2020. Home prices increased nationally by 4.5% from March 2019. On a month-over-month basis, prices increased by 1.3% in March 2020. CoreLogic HPI Forecast indicates annual price growth of 0.5% from March 2020 to March 2021, with a month-over-month increase of 0.6% between March and April 2020.

Increased homes sales in January and February 2020 accounts for the sustained acceleration of home prices seen in the March HPI. CoreLogic continues to monitor shifts in the housing market and economy in light of COVID-19, and, in the coming weeks, homebuying activity will likely continue to be tempered by unemployment and recommended ongoing social distancing practices. We can expect to see home price growth slow drastically in response to this declining demand, with the HPI Forecast predicting less than 1% annual increase in home prices by March 2021.

“Home prices for March reflect transactions negotiated primarily in the previous two months, prior to the implementation of the shelter-in-place policies. Rapid decline of purchase activity starting in the middle of March can be seen in other CoreLogic data and is consistent with our HPI forecast of slowing price growth in April,” said Dr. Frank Nothaft, chief economist at CoreLogic. “The first quarter GDP results showed that the country entered a recession in March. Unemployment claims have reached record highs and this economic environment will further impact the housing market into the foreseeable future.”
...
“The CoreLogic U.S. Home Price Index is predicted to remain largely unchanged over the next year or so after a long uninterrupted run of appreciation,” said Frank Martell, president and CEO of CoreLogic. “Although the economic fallout from lockdown orders, put in place to fight the spread of COVID-19, will be profound, the basic supports for a rebound in home purchase activity remain in place. Once the shelter-in-place policies are lifted, we expect millennials, who submitted home-purchase applications well into the crisis, to lead the way back to a positive, purchase-driven housing cycle.”
emphasis added

Click on graph for larger image in graph gallery.

This graph from CoreLogic shows the YoY change in the index - and the CoreLogic forecast.

CR Note: The impact of COVID-19 on house prices will probably not show up for several months. The report next month will be for April, and that is mostly for contracts signed in February and March. The overall impact on house prices will depend on the duration of the crisis.

by Calculated Risk on 5/05/2020 08:42:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $44.4 billion in March, up $4.6 billion from $39.8 billion in February, revised.

March exports were $187.7 billion, $20.0 billion less than February exports. March imports were $232.2 billion, $15.4 billion less than February imports.
emphasis added

Click on graph for larger image.

Both exports and imports decreased in March.

Exports are down 11% compared to March 2019; imports are down 12% compared to March 2019.

Both imports and exports have decreased sharply due to COVID-19.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that the U.S. exported a slight net positive petroleum products in recent months.

Oil imports averaged $47.09 per barrel in March, down from $57.24 in February, and down from $60.17 in March 2019.

The trade deficit with China decreased to $11.8 billion in March, from $20.7 billion in March 2019.

by Calculated Risk on 5/04/2020 07:48:00 PM

CR Note: The ISM non-manufacturing index is for April and will show a large decline.

Tuesday:
• At 8:30 AM, Trade Balance report for March from the Census Bureau. The consensus is the trade deficit to be $44.2 billion.  The U.S. trade deficit was at $39.9 Billion in February.

• At 10:00 AM, the ISM non-Manufacturing Index for April.   The consensus is for a reading of 44.0, down from 52.5.

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

by Calculated Risk on 5/04/2020 04:56:00 PM

The US might be able to test 400,000 to 600,000 people per day sometime in May according to Dr. Fauci - and that would probably be sufficient for test and trace.

There were 231,812 test results reported over the last 24 hours (the number of tests yesterday were revised up).

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 9.2% (red line). The US probably needs enough tests to push  the percentage positive below 5%. (probably much lower based on testing in New Zealand).

by Calculated Risk on 5/04/2020 04:00:00 PM

Note: To put these numbers in perspective, the MBA notes "For the week of March 2, only 0.25% of all loans were in forbearance."

From the MBA: Share of Mortgage Loans in Forbearance Increases to 7.54%

The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance increased from 6.99% of servicers’ portfolio volume in the prior week to 7.54% as of April 26, 2020. According to MBA’s estimate, a total of 3.80 million homeowners are now in forbearance plans.
...
“The share of loans in forbearance increased once again in the last full week of April, but the pace of new requests slowed,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “With millions more Americans filing for unemployment over the week, the level of job market distress continues to worsen. That is why we expect that the share of loans in forbearance will continue to grow, particularly as new mortgage payments come due in May.”

Added Fratantoni, “As states across the country begin to re-open their economies, a silver lining we are seeing is indications of increased activity in the housing market, including more purchase applications in some markets. We are hopeful that the housing market can eventually contribute to a broader rebound in economic activity, which would then begin to reverse the unprecedented job losses experienced during this crisis.”
emphasis added

Click on graph for larger image.

This graph shows the weekly forbearance requests as a percent of servicer's portfolio volume.

The requests peaked in the week of March 30th to April 5th, but might pick up again when May payments are due.

The MBA notes: "Forbearance requests as a percent of servicing portfolio volume (#) dropped across all investor types for the third consecutive week relative to the prior week: from 1.14% to 0.63%."

by Calculated Risk on 5/04/2020 12:45:00 PM

The following graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the April 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 heavy truck sales increased to a new all time high of 575 thousand SAAR in September 2019.


Click on graph for larger image.

However heavy truck sales started declining late last year due to lower oil prices.

And then heavy truck sales really declined at the end of March due to COVID-19 and the collapse in oil prices.

Heavy truck sales were at 259 thousand SAAR in April, down from 382 thousand SAAR in March, and down 54% from 565 thousand SAAR in April 2019.

Heavy truck sales in April were still above the Great Recession low of 180 thousand SAAR in May 2009, and still above the record low of 159 thousand SAAR in 1982.

by Calculated Risk on 5/04/2020 11:27:00 AM

Here is another monthly update on framing lumber prices.   Lumber prices declined sharply from the record highs in early 2018, and then increased until the COVID-19 crisis.

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

Click on graph for larger image in graph gallery.

Right now Random Lengths prices are unchanged from a year ago, and CME futures are down less than 1% 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.

Prices fell sharply due to COVID-19, however future prices have rebounded somewhat (Note: Construction is considered an essential activity is ongoing in many areas)

by Calculated Risk on 5/04/2020 09:32:00 AM

The BEA released their estimate of April vehicle sales this morning. The BEA estimated light vehicle sales of 8.58 million SAAR in April 2020 (Seasonally Adjusted Annual Rate), down 24.5% from the revised March sales rate, and down 47.9% from April 2019.

Sales in March were revised down slightly from 11.37 million SAAR to 11.36 million SAAR.

Click on graph for larger image.

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

The impact of COVID-19 is significant, although April may be the worst month for vehicle sales (depending on the course of the virus).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate of 8.58 million SAAR.

Sales collapsed in the second half of March, and in April were at the lowest level in 50 years - even lower than at the depth of the Great Recession.

by Calculated Risk on 5/04/2020 07:00:00 AM

Black Knight released their Mortgage Monitor report for March today. According to Black Knight, 3.39% of mortgages were delinquent in March, down from 3.65% in March 2019. Black Knight also reported that 0.42% of mortgages were in the foreclosure process, down from 0.51% a year ago.

This gives a total of 3.81% delinquent or in foreclosure.

Press Release: Black Knight: Inflow of New COVID-19 Forbearance Plans Declines Following 15th of April; Additional Surge Likely as May Payments Approach

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. As the economic impact of COVID-19 continues, Black Knight looked this month at key indicators of mortgage performance and daily forbearance activity, as well as the effects of the pandemic on interest rates and the housing market. As Black Knight Data & Analytics President Ben Graboske explained, the rate at which American homeowners have been seeking mortgage forbearances began to slow from the middle of April forward, and Black Knight will monitor this trend to see if it continues.

“After surging at the beginning of April and then rising again near the 15th – when most mortgages become past due and late fees are charged – the number of new forbearance requests has declined in recent weeks,” said Graboske. “While total forbearance volumes continue to mount, daily inflow has begun to taper off. Between 53,000 and 102,000 new plans have been put into place over each of the last nine days, and even the largest single-day volume was less than a quarter of what we saw at the start of April – and may see again next week. What remains an open question at this point is to what degree forbearance requests will look like at the beginning of May – when the next round of mortgage payments become due, and with nearly 30 million Americans newly unemployed in the last month. Once we have a sense for whether there is a similar spike in forbearance requests around the beginning of May, we’ll be in a much better position to more accurately forecast possible scenarios.

“As it is, in an optimistic scenario in which daily forbearance volumes continue to decline by 10% per day, the number of forbearances could peak at approximately 4.5 million in the coming months. Should current forbearance volumes hold steady through mid-June, more than 8 million homeowners could enter into forbearance plans, representing 16% or more of all mortgages. If that adverse scenario holds true, servicers would be required to advance $4 billion in monthly principal and interest (P&I) payments on GSE mortgages alone. Even under the FHFA’s recent four-month limit on P&I advances, servicers would still be bound to make $16 billion in advance payments over that time span.”

The month’s Mortgage Monitor report also looked at March prepayment activity, which surged to a near seven-year high. However, that was prior to the fallout from COVID-19 and the associated rise in unemployment and economic uncertainty. After rising in late March, 30-year interest rates fell back near record lows by mid-April. Rate lock data – a leading indicator of refinance and prepayment activity – suggests a steep decline in demand for refinancing. As of April 13, the average conventional 30-year note rate fell below 3.3% according to Black Knight’s Compass Analytics data – roughly equivalent to where it was in early March – but refinance-related rate locks saw little movement. In fact, refi locks were nearly 80% below their early-March peaks.
emphasis added

Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National Delinquency Rate.

From Black Knight:

• In what’s typically the strongest month of the year for mortgage performance, March delinquencies rose by 3.33%

• This the first March increase since the turn of the century – including the years of the Great Recession, and an early sign of COVID-19’s impact on the market

• In fact, March has historically seen delinquencies fall by 10% on average

The second graph shows the impact of COVID-19 on real estate showings:

• After falling as much as 63% below last year’s pace, in-person real estate showings began to pick up a bit beginning in the 3rd week of April

• Though a significant improvement, in-person real estate showings are still down 43% from the same time last year nationally

• In New York and Colorado – the latter of which has banned real estate showings as part of its shelter-in-place policy – in-person showings remain down 87% and 94% year-over-year respectively

• In Texas, showings are down by only 22% from the prior year, roughly half the decline being seen at the national level

The third graph shows possible scenarios for the number of forbearance plans:

• In an optimistic scenario in which daily forbearance volumes continue to decline by 10% per day, the number of forbearances could peak at approximately 4.5M in the coming months

• Should current forbearance volumes hold steady through mid-June, more than 8M homeowners could enter into forbearance plans, representing 16% or more of all mortgages

• If that adverse scenario holds true, servicers would be required to advance $4 billion in monthly principal and interest payments on GSE mortgages alone

• Even under the FHFA’s recent four-month limit on principal and interest (P&I advances), servicers would still be bound to make $16 billion in advance payments over that time span

There is much more in the mortgage monitor.