by Calculated Risk on 9/21/2011 07:24:00 AM

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

The Refinance Index increased 2.2 percent from the previous week. The seasonally adjusted Purchase Index decreased 4.7 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,500 or less) remained unchanged at 4.29 percent, with points increasing to 0.41 from 0.38 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances (> $417,500) decreased to 4.55 percent from 4.57 percent, with points increasing to 0.46 from 0.42 (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.

August was an especially weak month for this index. This increase was pretty small, and although this doesn't include the large number of cash buyers, this suggests fairly weak home sales in September and October.

Note from the MBA:

This week's results are based on an enhanced sample which captures more than 75% of all retail and consumer direct channel mortgage applications, compared to 50% previously. This expansion in survey coverage will benefit all users of the survey as it will increase the representativeness of the data.

Changes to the Weekly Application Survey include:

• The survey captures more than 75% of all U.S. retail and consumer direct mortgage applications, compared to 50% previously.
• MBA has tracked the old sample together with the new sample since January 14, 2011 to ensure that the new information is comparable with historical data.
• Due to the high correlation between the old sample and the new sample, no restatement of the historical data appears necessary.
• The release now includes additional information regarding mortgage rates, including reporting on 5/1 ARM rates and 30-year fixed rates for jumbo loans.

Note: Existing home sales will probably increase to around 4.92 million SAAR in August (Lawler's estimate) - above the consensus forecast of 4.75 million SAAR - but this index suggests another decline in September and October.

by Calculated Risk on 9/20/2011 08:16:00 PM

From the Financial Times: Troika makes ‘good progress’ on Greek deal

The European Commission said “good progress” was made in a teleconference between Athens and negotiators ... The full mission is expected to come back to Athens early next week to resume the review ...
excerpt with permission

There will be more details tomorrow, but it sounds like the next installment will happen in early October. This probably means a large number of public sector layoffs will be announced very soon.

Earlier:
• Housing Starts decline in August
• Philly Fed State Coincident Indexes Decline in August
• Multi-family Starts and Completions, Starts and the Unemployment Rate

by Calculated Risk on 9/20/2011 04:48:00 PM

From Bloomberg: Greece Loan Talks Resume After ‘Productive’ First Meeting

Greek Prime Minister George Papandreou’s government held a second round of talks with its main creditors today ... call started at 9 p.m. Greek time [2 PM ET].

Papandreou will chair a Cabinet meeting at 11:30 a.m. Athens time tomorrow to discuss the content of the talks with the so-called troika team, which comprises the European Union, European Central Bank and International Monetary Fund.

There should be an announcement later tonight or tomorrow morning.

The Greek 2 year yield was up to 64.2%. The Greek 1 year yield is at 130%.

The Portuguese 2 year yield is up to 17.3% and the Irish 2 year yield was down to 9.3%.

The Italian 10 year yield was up to 5.7% following the downgrade.

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

by Calculated Risk on 9/20/2011 01:41:00 PM

Since it takes over a year on average to complete multi-family projects - and multi-family starts were at a record low last year - it makes sense that there will be a record low, or near record low, number of multi-family completions this year.

The following graph shows the lag between multi-family starts and completions using a 12 month rolling total.

The blue line is for multifamily starts and the red line is for multifamily completions. Since multifamily starts collapsed in 2009, completions collapsed in 2010.

Click on graph for larger image in graph gallery.

The rolling 12 month total for starts (blue line) is now above the rolling 12 month for completions (red line), and they are heading in opposite directions (although completions ticked up a little in August).

It is important to note that even with a strong increase in multi-family construction, it is 1) from a very low level, and 2) multi-family is a small part of residential investment (RI). Still this is bright spot for construction.

Housing Starts and the Unemployment Rate

The following graph shows single family housing starts (through August) and the unemployment rate (inverted) through August. Note: there are many other factors impacting unemployment, but housing is a key sector.

You can see both the correlation and the lag. The lag is usually about 12 to 18 months, with peak correlation at a lag of 16 months for single unit starts. The 2001 recession was a business investment led recession, and the pattern didn't hold.

Housing starts have moved sideways for the last two and a half years and this is one of the reasons the unemployment rate has stayed elevated.

With the huge overhang of existing housing units, this key sector hasn't been participating in the recovery. This is what I expected when I first posted the above graph over two years ago!

The good news is residential investment in multi-family and home improvement is increasing modestly, but construction job growth will remain sluggish until the excess housing supply is absorbed.

Earlier:
• Housing Starts decline in August

by Calculated Risk on 9/20/2011 11:15:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for August 2011. In the past month, the indexes increased in 26 states, decreased in 17, and remained unchanged in seven for a one-month diffusion index of 18. Over the past three months, the indexes increased in 33 states, decreased in 16, and remained unchanged in one (Maryland) for a three-month diffusion index of 34.

Note: These are coincident indexes constructed from state employment data. From the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on graph for larger image.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In August, 30 states had increasing activity, the lowest number since January 2010. Looking back at previous recessions, the current level is close to when the U.S. entered recession - however it is important to remember that August was an especially weak month due to the debt ceiling debate.

In February, 47 states showed increasing activity.

Here is a map of the three month change in the Philly Fed state coincident indicators. Several states have turned red again. This map was all red during the worst of the recession, and all green not long ago.

Earlier:
• Housing Starts decline in August