by Calculated Risk on 11/16/2011 10:00:00 AM

The National Association of Home Builders (NAHB) reports the housing market index (HMI) increased in November to 20 from 17 in October. Any number under 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Rises Three Points in November

Builder confidence in the market for newly built, single-family homes rose by three points to 20 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) for November, released today. The gain builds on a revised three-point increase in October, and brings the confidence gauge to its highest level since May of 2010.
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“This second consecutive gain in the HMI is evidence that well-qualified buyers in select areas are being tempted back into the market by today’s extremely favorable mortgage rates and prices,” said NAHB Chief Economist David Crowe. “We are anticipating further, gradual gains in the builder confidence gauge heading into 2012 due to these pockets of improving conditions that are slowly spreading.”
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Each of the HMI’s three component indexes continued to build on gains registered in the previous month in November. The component gauging current sales conditions rose three points to 20 – its highest level since May 2010 – while the component gauging future sales expectations rose two points to 25 – its highest level since March of 2011. The component gauging traffic of prospective buyers rose one point to 15, which was its highest point since May of 2010.

The HMI rose in three out of four regions in November, with a three-point gain to 17 registered in the Northeast, an eight-point gain to 23 registered in the Midwest, and a two-point gain to 21 registered in the South. After posting a big increase in October, the West returned to trend this month with a six-point decline to 15.

Click on graph for larger image.

This graph compares the NAHB HMI (left scale) with single family housing starts (right scale). This includes the November release for the HMI and the September data for starts (October housing starts will be released tomorrow).

Both confidence and housing starts have been moving sideways at a very depressed level for several years. This is still very low, but this is the highest level since May 2010 - and that boost was due to the housing tax credit. Not counting the tax credit, the last time the index was above this level was in 2007.

by Calculated Risk on 11/16/2011 09:30:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production expanded 0.7 percent in October after having declined 0.1 percent in September. Previously, industrial production was reported to have gained 0.2 percent in September; most of this revision resulted from lower estimated output for mining. Factory output increased 0.5 percent in October after having risen 0.3 percent in September. Production at mines climbed 2.3 percent in October, while the output of utilities edged down 0.1 percent. At 94.7 percent of its 2007 average, total industrial production for October was 3.9 percent above its year-earlier level. Capacity utilization for total industry stepped up to 77.8 percent, a rate 2.1 percentage points above its level from a year earlier but 2.6 percentage points below its long-run (1972--2010) average.

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 10.5 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 77.8% is still 2.6 percentage points below its average from 1972 to 2010 and below the pre-recession levels of 81.3% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased in October to 94.7, however September was revised down.

The consensus was for a 0.4% increase in Industrial Production in October, and an increase to 77.6% for Capacity Utilization. Adjusting for the downward revision for September, this was about at consensus.
All current manufacturing graphs

by Calculated Risk on 11/16/2011 06:00:00 AM

The BuildFax Residential Remodeling Index was at 141.4 in September, up from 138.6 in August. This is based on the number of properties pulling residential construction permits in a given month.

From BuildFax: Remodeling Activity Reaches Record Levels According to BuildFax Remodeling Index for September

Today, BuildFax®, unveiled its BuildFax Remodeling Index (BFRI) for September 2011, which shows that remodeling activity reached a record high during the month.
...
The latest BFRI showed that September 2011 became the month with the highest level of remodeling activity since the Index was introduced in 2004 and represented the 23rd consecutive month of increases. In addition, BuildFax data revealed the most popular permitted residential remodeling jobs since 2006 have been roof remodels/replacements, followed by deck and bathroom remodels.
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“Mortgage rates continue to be near record lows, and as homeowners from coast to coast refinance, they are continuing to update their current home and invest in their properties,” said Joe Emison, Vice President of Research and Development at BuildFax. “The data from BuildFax show that homeowners are not only doing important ‘maintenance’ projects, such as fixing their roof, but also taking on projects that add to the ‘livability’ of their homes by adding decks, remodeling their bathrooms and updating their kitchens."

Click on graph for larger image.

This is the highest level for the index (started in 2004) - even above the levels from 2004 through 2006 during the home equity ("home ATM") withdrawal boom.

Note: Permits are not adjusted by value, so this doesn't mean there is more money being spent, just more permit activity. Also some smaller remodeling projects are done without permits and the index will miss that activity.

Since there is a strong seasonal pattern for remodeling, the second graph shows the year-over-year change from the same month of the previous year.

The remodeling index is up 34% from September 2010. This is the highest year-over-year increase in activity since the index started.

Even though new home construction is still moving sideways, two other components of residential investment will increase in 2011: multi-family construction and home improvement.

Data Source: BuildFax, Courtesy of Index.BuildFax.com

by Calculated Risk on 11/15/2011 08:40:00 PM

Here are the new Home Affordable Refinance Program (HARP) guidelines from Fannie Mae: Selling Guide Announcement SEL-2011-12

As noted by the FHFA last month, the HARP deadline will be extended, there is no maximum LTV (except in certain cases), and most Reps and warrants have been eliminated.

On the timing, according to Fannie Mae: "The expansion of the LTV ratio limits is effective for Refi Plus mortgage loans with application dates on or after December 1, 2011." Desktop Underwriter® (DU) will be updated in March.

One of the keys is the elimination of most Reps and warrants, from Fannie Mae:

For DU Refi Plus:

• The lender is not responsible for any of the representations and warranties associated with the original loan.

• The lender is relieved of the standard underwriting representations and warranties (eligibility, credit history, liabilities, income and asset assessment) with respect to the new mortgage loan if the lender meets all of the following requirements:
- All data in the loan casefile is complete, accurate, and not fraudulent.
- The lender follows the instructions in the DU Underwriting Findings Report regarding income, employment, asset, and fieldwork documentation.
- The lender complies with all other requirements documented in the Selling Guide, A2-2.1-04, Limited Waiver of Contractual Warranties for Mortgages Submitted to DU.

For Refi Plus:

• With respect to the original loan, the lender must represent and warrant to the following:

- The loan was eligible for sale in accordance with Fannie Mae’s Charter at the time of delivery to Fannie Mae.

- The loan was originated in compliance with laws. See the A3-2-01, Compliance with Laws.

- The lender represents and warrants that the original loan being refinanced by a Refi Plus mortgage loan was not originated or sold pursuant to any scheme or pattern of fraud ...

If I'm reading this correctly, the elimination of Reps and warrants for the original loan applies to Desktop Underwriter® (DU) and that will not be updated until March.

by Calculated Risk on 11/15/2011 06:44:00 PM

From DataQuick: Southland Home Sales Inch Up from 2010; Median Price Down Again

Southland home sales rose slightly in October compared with a year earlier but were still nearly 30 percent below the long-term average. ...
A total of 16,829 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties in October. That was down 7.3 percent from 18,149 in September and up 0.5 percent from 16,744 in October 2010, according to San Diego-based DataQuick.

A drop in sales between September and October is not unusual, but last month’s decline was larger than the average change – a decline of 0.7 percent – between those months since 1988, when DataQuick's statistics begin.
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While October sales of existing (not new) houses and condos rose 2.2 percent and 1.3 percent, respectively, from a year earlier, sales of newly built homes dropped 18.4 percent to the lowest level on record for an October.
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“The lower conforming loan limits implemented last month help explain the relatively sharp drop in mid- to high-end sales during October. Now we’ll have to see if the private loan market can fill the void,” said John Walsh, DataQuick president.
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Distressed property sales accounted for 52.5 percent of the Southland resale market last month, up from 50.8 percent in September but down from 53.7 percent a year earlier. Nearly one out of three homes resold last month was a foreclosure, while roughly one in five was a “short sale.”

New home sales were at a record low (Note: DataQuick reports new home sales at closing - the Census Bureau reports new home sales when contracts are signed - usually about six months earlier). Also over half of existing home sales in SoCal were distressed sales in October; a very unhealthy market.

NAR is scheduled to reported October existing home sales on Monday, November 21st and so far it appears sales will be down in October (seasonally adjusted) compared to September.