by Calculated Risk on 8/17/2011 03:35:00 PM

DataQuick has developed a new resource for tracking home sales that is updated weekly. It can be accessed by going to the DataQuick news site and clicking on the National Home Sales at the top (or directly here: National Home Sales Snapshot).

DataQuick provides sales and median prices using the most current 30/31 days based on 98 of the Top 100 US MSAs (excluding Louisville and Wichita). DataQuick estimates this is almost two-thirds of all US home sales. These are real sales counts (as opposed to the NAR approach that will probably be changed later this year). DataQuick also provides median prices.

Right now DataQuick is combining existing and new home sales, and they were kind enough to break out the data for me.

This resource will allow us to track sales weekly, although we have to remember this data is Not Seasonally Adjusted (NSA), and both the NAR and Census Bureau headline numbers are reported on a Seasonally Adjusted Annual Rate (SAAR) basis.

I decided to compare the DataQuick numbers to the NAR and Census Bureau reports. Both the NAR and Census Bureau report monthly, and the DataQuick data is weekly.

Click on graph for larger image in graph gallery.

This graph shows the NSA data for DataQuick and the NAR. The dashed line is scaling up the DataQuick numbers by .6625 (their estimate of sales coverage).

The NAR recognizes that their estimate are too high - and they are planning revising down their estimates this fall. However this suggests that the NAR might be overestimating by even more than the 10% to 15% that many analysts think. This also suggests sales in 2011 are very weak.

The second graph compares the DataQuick new home sales numbers with the Census Bureau. The Census Bureau reports when contracts are signed and DataQuick reports when the purchase is closed. So there are some timing issues.

The dashed line is using the same scaling factor as for existing homes. The new home data from the Census Bureau appears to be fairly close to the DataQuick numbers - although it is hard to tell because of the large spikes due to the homebuyer tax credit and because of the lag between contract signings and closings.

This appears to be very useful data for tracking home sales.

by Calculated Risk on 8/17/2011 12:42:00 PM

This morning the MBA reported that there was a sharp increase in mortgage refinance activity.

“Refinance application volume increased substantially for the week, although there was substantial variation across the market. In September MBA’s Weekly Applications Survey will transition to an expanded sample that covers 75% of the retail market rather than the current sample that covers roughly 50% of the retail market. That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50 percent for the week. The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines.” [said Mike Fratantoni, MBA’s Vice President of Research and Economics

First, the increase in the sample size is good news. There have been times when the mortgage purchase activity index wasn't very useful because so many mortgage lenders were going out of business.

Also it is interesting that some lenders haven't lowered their rates (probably many of the biggest mortgage lenders).

Here is a graph of the MBA refinance index compared to the ten year treasury yield.

Click on graph for larger image in graph gallery.

Although refinance activity has picked up, it is still well below the level of the huge refinance boom of 2002/2003, and below the smaller refinance peaks in 2008, 2009 and last year.

It takes lower and lower rates to get people to refi (at least lower than recent purchase rates). However if interest rates fall much further there will probably be another large increase in refinance activity.

by Calculated Risk on 8/17/2011 09:44:00 AM

Note: This index is a leading indicator for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Drops for Fifth Straight Month

The American Institute of Architects (AIA) reported the July ABI score was 45.1 – the steepest decline in billings since February 2010 – after a reading of 46.3 the previous month. This score reflects a continued decrease in demand for design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 53.7, a considerable slowdown from a reading of 58.1in June.

“Business conditions for architecture firms have turned down sharply,” said AIA Chief Economist, Kermit Baker, PhD, Hon. AIA. “Late last year and in the first couple of months of this year there was a sense that we were slowly pulling out of the downturn, but now the concern is that we haven’t yet reached the bottom of the cycle. Current high levels of uncertainly in the economy don’t point to an immediate turnaround.”

Click on graph for larger image in graph gallery.

This graph shows the Architecture Billings Index since 1996. The index decreased in in July to 45.1 from 46.3 in June. Anything below 50 indicates a contraction in demand for architects' services.

Note: Nonresidential construction includes commercial and industrial facilities like hotels and office buildings, as well as schools, hospitals and other institutions. Note that the government sector is the weakest. The American Recovery and Reinvestment Act of 2009 is winding down, and state and local governments are still cutting back.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. So this suggests further declines in CRE investment in 2012.

by Calculated Risk on 8/17/2011 08:03:00 AM

The MBA reports: Refinance Applications Increase in Latest MBA Weekly Survey

The Refinance Index increased 8.0 percent from the previous week, but was 16.3 percent lower than the same week last year. The seasonally adjusted Purchase Index decreased 9.1 percent from one week earlier.
...
"Unprecedented volatility in the stock market last week amid additional signs that the economy has slowed led to further drops in mortgage rates, with the 15-year rate reaching a new low for the MBA survey," said Mike Fratantoni, MBA's Vice President of Research and Economics. "Purchase application activity fell sharply over the previous week, likely the result of potential homebuyers hesitant to purchase in this highly volatile and uncertain environment."

Fratantoni continued, "Refinance application volume increased substantially for the week, although there was substantial variation across the market. In September MBA's Weekly Applications Survey will transition to an expanded sample that covers 75% of the retail market rather than the current sample that covers roughly 50% of the retail market. That expanded sample showed a significantly larger increase in refinance applications than the current sample, with some lenders reporting increases in refinance applications in excess of 50 percent for the week. The big differences in refinance volumes were likely driven by the decisions of some lenders not to drop rates last week, largely due to the need to manage their pipelines."
...
The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.32 percent from 4.37 percent, with points decreasing to 0.87 from 1.07 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The following graph shows the MBA Purchase Index and four week moving average since 1990.

Click on graph for larger image in graph gallery.

The four week average of the purchase index has been moving down recently and is at about 1997 levels. Of course this doesn't include the large number of cash buyers ... but purchase application activity was especially weak last week.

by Calculated Risk on 8/16/2011 08:11:00 PM

Just an update on the Merkel / Sarkozy meeting earlier today. As expected there was no annoucement of a "eurobond" and no expansion of the EFSF.

Merkel and Sarkozy proposed closer coordination of economic policy in the eurozone. The fear in Germany is that closer coordination means a step towards a fiscal union - and to many Germans that means a transfer union ... here are a few stories:

From the NY Times: Sarkozy and Merkel Call for More Fiscal Unity in Europe

France and Germany also proposed the creation of what Mr. Sarkozy called “a true economic government for the euro zone” that would be made up of heads of state of all of the 17 nations that share the European currency. This council, he said, would meet at least twice a year and would be led by a president who would serve for a term of two and a half years. He said he and Mrs. Merkel would jointly propose that Herman van Rompuy, a Belgian and the current president of the European Union, be the first to take on this role.
...
“What we are proposing here is the means with which we can solve the crisis right now and win back trust, step by step,” Mrs. Merkel said. “I do not think euro bonds will help us in this.”
...
“Euro bonds can be imagined one day, but at the end of the European integration process not at the beginning,” Mr. Sarkozy said.

From the WSJ: Fresh Plan for Europe Crisis

From the Financial Times: Merkel and Sarkozy pledge to defend euro

Here are the bond yields as of Tuesday. Here is a graph of the 10 year spread (Italy to Germany) from Bloomberg. And for Spain to Germany. The Italian spread is at 267, down from 389 on Aug 4th, and the Spanish spread is at 266, down from 398 on Aug 4th. The yield on the Spanish Ten and Italian 10 year bonds are under 5%.

Also the Irish 2 year yield is down sharply to 8.9%. And the French 10 year is under 3%.

Here are the links for bond yields for several countries (source: Bloomberg):

Greece	2 Year	5 Year	10 Year
Portugal	2 Year	5 Year	10 Year
Ireland	2 Year	5 Year	10 Year
Spain	2 Year	5 Year	10 Year
Italy	2 Year	5 Year	10 Year
Belgium	2 Year	5 Year	10 Year
France	2 Year	5 Year	10 Year
Germany	2 Year	5 Year	10 Year

Earlier:
• Housing Starts decline slightly in July
• Industrial Production increased 0.9% in July, Capacity Utilization increases
• Multi-family Starts and Completions, and Quarterly Starts by Intent
• Lawler: Early Read on Existing Home Sales in July