by Calculated Risk on 9/01/2010 07:33:00 AM

The MBA reports: Mortgage Applications Increase as Rates Hit New Low in MBA Weekly Survey

The Refinance Index increased 2.8 percent from the previous week and is at its highest level since May 1, 2009. The seasonally adjusted Purchase Index increased 1.8 percent from one week earlier.
...
"Refinancing activity picked up again last week, reaching new 15-month highs, as borrowers took advantage of even lower mortgage rates. The drop in mortgage rates was in line with Treasury rates as the latest data continue to show weak economic growth and an exceptionally weak housing market," said Michael Fratantoni, MBA's Vice President of Research and Economics. "The sharp decline in MBA's Purchase Application index in May had provided a clear leading indicator of the drops in new and existing home sales that were reported for June and July. Despite the slight increase in purchase activity in the past week, the continued low level of purchase applications indicates we are unlikely to see an increase in new home sales reported for August or existing home sales reported for September."
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.43 percent from 4.55 percent, with points increasing to 1.34 from 0.89 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans. The contract rate is a new low for this survey.

Click on graph for larger image in new window.

This graph shows the MBA Purchase Index and four week moving average since 2002.

Usually I start the graph in January 1990, but this shorter term graph shows that the purchase index has been moving sideways since May of this year.

As the MBA's Fratantoni noted, this suggests existing home sales in August and September will be around the same level as in July.

by Calculated Risk on 8/31/2010 07:10:00 PM

Tom Lawler reports that at the end of August, listings on Realtor.com totaled 4,007,860, down 0.7% from 4,038,133 at the end of July. This is 2.5% above August 2009.

The NAR reported inventory at 3.98 million at the end of July, and at 3.924 million in August 2009. So they will probably report inventory at close to 4 million for August.

Since sales probably only increased slightly in August, the months-of-supply metric will be in double digits again in August and probably still over 12 months.

Note: there is a seasonal pattern for existing home inventory. Usually inventory peaks in July and declines slightly through October - and then declines sharply at the end of the year as sellers take their homes off the market for the holidays.

by Calculated Risk on 8/31/2010 04:14:00 PM

This is one of several industry specific indexes I track each month.

Click on graph for larger image in new window.

Same store sales and customer traffic both declined in July (on a year-over-year basis). This is the fourth consecutive month of declines.

Unfortunately the data for this index only goes back to 2002.

Note: Any reading above 100 shows expansion for this index.

From the National Restaurant Association (NRA): Restaurant Industry Outlook Remained Uncertain in July as Restaurant Performance Index Remains Essentially Flat

As a result of soft sales and traffic levels and a deteriorating outlook among restaurant operators, the National Restaurant Association’s comprehensive index of restaurant activity remained essentially flat in July. The Association’s Restaurant Performance Index (RPI) – a monthly composite index that tracks the health of and outlook for the U.S. restaurant industry – stood at 99.4 in July, down 0.1 percent from June and its fourth consecutive decline. In addition, the RPI stood below 100 for the third consecutive month, which signifies contraction in the index of key industry indicators.
...
Restaurant operators reported negative same-store sales for the fourth consecutive month in July, with the overall results similar to the June performance.
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Restaurant operators also reported a net decline in customer traffic levels in July.
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Restaurant operators have become less optimistic about their prospects for sales growth in recent months.
emphasis added

Restaurants are a discretionary expense, and this contraction could be because of the sluggish recovery or might suggest further weakness in consumer spending in the months ahead.

by Calculated Risk on 8/31/2010 02:00:00 PM

From the Fed: Minutes of the Federal Open Market Committee

Economic outlook:

Members still saw the economic expansion continuing, and most believed that inflation was likely to stabilize near recent low readings in coming quarters and then gradually rise toward levels they consider more consistent with the Committee's dual mandate for maximum employment and price stability. Nonetheless, members generally judged that the economic outlook had softened somewhat more than they had anticipated, particularly for the near term, and some saw increased downside risks to the outlook for both growth and inflation. Some members expressed a concern that in this context any further adverse shocks could have disproportionate effects, resulting in a significant slowing in growth going forward. While no member saw an appreciable risk of deflation, some judged that the risk of further near-term disinflation had increased somewhat. More broadly, members generally saw both employment and inflation as likely to fall short of levels consistent with the dual mandate for longer than had been anticipated.

And on policy:

All but one member concluded that it would be appropriate to begin reinvesting principal received from agency debt and MBS held in the SOMA by purchasing longer-term Treasury securities in order to keep constant the face value of securities held in the SOMA and thus avoid the upward pressure on longer-term interest rates that might result if those holdings were allowed to decline. Several members emphasized that in addition to continuing to develop and test instruments to facilitate an eventual exit from the period of unusually accommodative monetary policy, the Committee would need to consider steps it could take to provide additional policy stimulus if the outlook were to weaken appreciably further. Given the softer tone of recent data and the more modest near-term outlook, members agreed that some changes to the statement's characterization of the economic and financial situation were necessary.

Not much new ...

by Calculated Risk on 8/31/2010 12:54:00 PM

As we've discussed for some time, the Case-Shiller index is seriously lagged to real time data. The release today was for "June", but it is really an average of April, May and June.

Home sales were strong in April, May and June, and then collapsed in July. And prices have probably been falling for two months now - but that won't show up in Case-Shiller until the end of next month or even October (the Case-Shiller release at the end of October will be for June, July and August).

Note: The title for this post is from Rolfe Winkler at the WSJ's Heard on the Street (last week): Housing's Witching Hour

[T]he S&P/Case-Shiller home-price index ... could be set for another leg down. The index is computed using a three-month rolling average, meaning last month's weakness really should assert itself in late October.

RadarLogic released a statement today: As Predicted, June S&P/Case-Shiller Home Price Indices Overstate Housing Market Strength

[T]he latest S&P/Case-Shiller home price indices show healthy improvement in home prices while other housing market indicators, including the RPX Composite price, show that housing markets are starting to weaken.

... We believe that these figures overstate the current strength of the U.S. housing markets. As we reported in this month’s RPX Monthly Housing Market Report, the RPX 25-MSA Composite Price declined 0.2% through the end of June on a year-over-year basis. ...

The conflict between the strength expressed in the S&P/Case-Shiller indices and the weakness apparent in other housing market indicators likely arises from the fact that the S&P/Case-Shiller indices are calculated using data from transactions that occur over a three-month period. As a result, the indices smooth over recent price movements and can take a number of months to reflect price fluctuations.

... Our concern is that, as we saw in spring 2009, the only effective stimulus of new housing demand will prove to be a precipitous decline in home prices. Our current analysis shows early signs that such a dynamic is approaching.

The CoreLogic repeat sales index showed prices were flat from May to June (CoreLogic uses a weighted 3 month average and picks up the trend change a little quicker than Case-Shiller).