by Calculated Risk on 7/25/2020 12:36:00 PM

UCI Professor Chris Schwarz and I have presented together before.  Always interesting!

He will be offering his thoughts on the economy, Tuesday, July 28th at 11:30 AM PT (2:30 PM ET).

Professor Schwarz writes: "Given the new lockdowns, uncertainty over the stimulus package, Q2 earnings, and financial market conditions, I will host another Economic and Market Update on July 28th at 11:30AM PST. As usual, the event is free."

You can register here.

by Calculated Risk on 7/25/2020 08:11:00 AM

The key report this week is the advance estimate of Q2 GDP.

Other key reports include Personal Income and Outlays for June and Case-Shiller house prices for May.

For manufacturing, the July Richmond and Dallas Fed manufacturing surveys will be released.

The FOMC meets this week, and no change to policy is expected.

----- Monday, July 27th -----
8:30 AM: Durable Goods Orders for June from the Census Bureau. The consensus is for a 7.2% increase in durable goods orders.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for July.

----- Tuesday, July 28th -----
9:00 AM: S&P/Case-Shiller House Price Index for May.

This graph shows the year-over-year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 4.0% year-over-year increase in the Comp 20 index for May.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for July. This is the last of the regional surveys for July.

10:00 AM: The Q2 2019 Housing Vacancies and Homeownership report from the Census Bureau.

----- Wednesday, July 29th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Pending Home Sales Index for June. The consensus is for a 15.3% increase in the index.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, July 30th -----
8:30 AM: Gross Domestic Product, 2nd quarter 2020 (advance estimate), and annual update. The consensus is that real GDP decreased 34.0% annualized in Q2, down from -5.0% in Q1.

8:30 AM: The initial weekly unemployment claims report will be released. The early consensus is for a 1.550 million initial claims, up from 1.416 million the previous week.

----- Friday, July 31st -----
8:30 AM ET: Personal Income and Outlays, June 2020. The consensus is for a 0.5% decrease in personal income, and for a 5.5% increase in personal spending. And for the Core PCE price index to increase 0.2%.

9:45 AM: Chicago Purchasing Managers Index for July.

10:00 AM: University of Michigan's Consumer sentiment index (Final for July). The consensus is for a reading of 72.9.

by Calculated Risk on 7/24/2020 06:27:00 PM

The US is now reporting over 700,000 tests per day. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 929,838 test results reported over the last 24 hours. This is a new record.

There were 75,193 positive tests.

This was the 4th consecutive day with over 1,000 deaths. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 8.1% (red line).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

by Calculated Risk on 7/24/2020 01:21:00 PM

From Wards: U.S. Light-Vehicle Sales Continue Improvement in July Despite Inventory Concerns (pay content)

Click on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for July (Red).

Sales have bounced back from the April low, but are still down sharply year-over-year.

The Wards forecast of 14.1 million SAAR, would be up 8% from June, and down 16% from July 2019.

This would put sales in 2020, through July, down about 23% compared to the same period in 2019.

by Calculated Risk on 7/24/2020 11:39:00 AM

Important: GDP is reported at a seasonally adjusted annual rate (SAAR). So a 35% Q2 decline is around 10% decline from Q1 (SA).

From Merrill Lynch:

The advance 2Q GDP estimate comes out next Thursday and will reveal the depth of the recession. Real activity likely collapsed -36% qoq saar, translating into a peak-to-trough decline of -11.7%. ... We forecast a contraction of -5.7% in 2020, followed by a 3.4% rebound 2021. [July 24 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at -14.3% for 2020:Q2 and 13.3% for 2020:Q3. [July 24 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2020 is -34.7 percent on July 17, down from -34.5 percent on July 16. [July 17 estimate]

by Calculated Risk on 7/24/2020 10:36:00 AM

New home sales for June were reported at 776,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down slightly, combined.

This was well above consensus expectations, and this was the highest sales rate since 2007. Clearly low mortgages rates, and low sales in March and April (due to the pandemic) have led to a bounce back in sales in May and June (and probably in July).

New home sales are counted when the contract is signed, whereas existing home sales are counted when the transaction closes.   So new home sales performed better than existing home sales in May and June (on a year-over-year basis).   Based on mortgage applications and regional pending home sales reports, there will be a further pickup in existing home sales in July, and builder reports suggest there will probably be a further pickup in new home sales too.

Important: No one should get too excited.  Many years ago, I wrote several article about how new home sales and housing starts (especially single family starts) were some of the best leading indicators for the economy.   However, I've noted that there are times when this isn't true.   NOW is one of those times.

Currently the course of the economy will be determined by the course of the virus, and New Home Sales tell us nothing about the future of the pandemic.  Without the pandemic, I'd be very positive about this report.

The longer the pandemic lasts, the more long term damage to the economy - and, if the pandemic worsens and persists - that will eventually negatively impact housing.  The outlook for housing depends on the outlook for the pandemic.

Earlier: New Home Sales increased to 776,000 Annual Rate in June.

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 up 6.9% year-over-year (YoY) in June.   Year-to-date (YTD) sales are up 3.2%.

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 June 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 (with help from the pandemic).

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 was close to the historical ratio before the pandemic.

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.

by Calculated Risk on 7/24/2020 10:13:00 AM

The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 776 thousand.

This is the highest sales rate since 2007.

The previous three months were revised down slightly, combined.

Sales of new single-family houses in June 2020 were at a seasonally adjusted annual rate of 776,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 13.8 percent above the revised May rate of 682,000 and is 6.9 percent above the June 2019 estimate of 726,000.
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.

The second graph shows New Home Months of Supply.

The months of supply decreased in June to 4.7 months from 5.5 months in May.

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

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

"The seasonally-adjusted estimate of new houses for sale at the end of June was 307,000. This represents a supply of 4.7 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 June 2020 (red column), 74 thousand new homes were sold (NSA). Last year, 66 thousand homes were sold in June.

The all time high for June was 115 thousand in 2005, and the all time low for June was 28 thousand in 2010 and in 2011.

This was above expectations of 700 thousand sales SAAR, and sales in the three previous months were revised down slightly, combined. I'll have more later today.

by Calculated Risk on 7/24/2020 09:03:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

From Forbearance Volumes See Slight Rise to 4,119,000

The latest data from the McDash Flash Forbearance Tracker shows that there was minimal overall change in the number of active forbearance cases this week (+2K), bringing the total number of loans in active forbearance to 4,119,000. The slight rise was driven by a modest increase in forbearance plans among portfolio/private labeled securitization loans (+12k) and FHA/VA loans (+8k). The number of forbearances among GSE loans fell by 18k for the week.
emphasis added

Click on graph for larger image.

CR Note: There will be another disaster relief package soon (aka CARES II), but we might see an increase in forbearance activity if the package isn't available by early August.

by Calculated Risk on 7/23/2020 08:49:00 PM

Friday:
• At 10:00 AM, New Home Sales for June from the Census Bureau. The consensus is for 700 thousand SAAR, up from 676 thousand in May.

by Calculated Risk on 7/23/2020 05:47:00 PM

The US is now reporting over 700,000 tests per day. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 774,193 test results reported over the last 24 hours.

There were 71,027 positive tests.

This was the 3rd consecutive day with over 1,000 deaths. See the graph on US Daily Deaths here.

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).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.