by Calculated Risk on 7/19/2012 01:42:00 PM

Earlier ...

• From the Philly Fed: July 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of −16.6 in June to −12.9. This marks the third consecutive negative reading for the index ...
...
Labor market conditions at the reporting firms deteriorated this month. The current employment index decreased 10 points, to −8.4, its second negative reading in three months. ... Firms also indicated fewer hours worked this month: The average workweek index increased 2 points but posted its fourth consecutive negative reading.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through July. The ISM and total Fed surveys are through June.

The average of the Empire State and Philly Fed surveys increased in July, but the average is still negative (contraction).

• The Conference Board leading indicators declined 0.3% in June:

The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.3 percent in June to 95.6 (2004 = 100), following a 0.4 percent increase in May, and a 0.1 percent decline in April.

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI declined in two of the last six months, and its six-month growth rate has eased in the last three months. The strengths among the leading indicators have become less widespread as consumer expectations and manufacturing new orders offset gains in the financial, labor, and construction-related components. Meanwhile, the coincident economic index, a measure of current economic conditions, has risen slowly but steadily in the last three months.”

Says Ken Goldstein, economist at The Conference Board: “The U.S. economy is growing very slowly. The CEI basically reflects this steady but soft pace of overall economic activity. The LEI is pointing to no strengthening over the next few months, as the economy continues to sail through strong headwinds domestically and internationally.”

by Calculated Risk on 7/19/2012 11:47:00 AM

I can't emphasize enough - what matters the most in the NAR's existing home sales report is inventory; what matters the most in the new home sales report next week is sales. It is active inventory that impacts prices (although the "shadow" inventory will keep prices from rising). Those looking at the number of existing home sales for a recovery in housing are looking at the wrong number. For existing home sales, look at inventory first.

Although there are always questions about the NAR data, the report this morning was another positive housing report.

The NAR reported inventory decreased to 2.39 million units in June, down 3.2% from the downwardly revised 2.47 million in May (revised down from 2.49 million). This is down 24.4% from June 2011, and down 10.8% from the inventory level in June 2005 (mid-2005 was when inventory started increasing sharply). This is the lowest level for a June since 2002.

Clearly inventory will be below the comparable month in 2005 for the rest of the year and will probably track close to the level in 2004. It is also possible that inventory has peaked for 2012 (or is at least very close to the peak).

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

The following graph shows inventory by month since 2004. In 2005 (dark blue columns), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red for 2012) inventory is at the lowest level for the month of June since 2002, and inventory is below the level in June 2005 (not counting contingent sales). However inventory is still elevated using months-of-supply, but I expect months-of-supply to be below 6 later this year.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA (red column) are above the sales for the 2009 and 2011 (2010 was higher because of the tax credit). Sales are well below the bubble years of 2005 and 2006.

On distressed sales from the NAR:

Distressed homes - foreclosures and short sales sold at deep discounts - accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011.

However other data suggest distressed sales were down in June, and that is a positive sign for the housing market.

Earlier:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 10:00:00 AM

The NAR reports: June Existing-Home Prices Rise Again, Sales Down with Constrained Supply

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 5.4 percent to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, but are 4.5 percent higher than the 4.18 million-unit level in June 2011.
...
Total housing inventory at the end June fell another 3.2 percent to 2.39 million existing homes available for sale, which represents a 6.6-month supply at the current sales pace, up from a 6.4-month supply in May. Listed inventory is 24.4 percent below a year ago when there was a 9.1-month supply.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in June 2012 (4.37 million SAAR) were 5.4% lower than last month, and were 4.5% above the June 2011 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory declined to 2.39 million in June from the downwardly revised 2.47 million in May (revised down from 2.49 million). Inventory is not seasonally adjusted, and usually inventory increases from the seasonal lows in December and January to the seasonal high in mid-summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 24.4% year-over-year in June from June 2011. This is the sixteenth consecutive month with a YoY decrease in inventory, and the largest year-over-year decline reported.

Months of supply increased to 6.6 months in June.

This was below expectations of sales of 4.65 million. However, as I've noted before, those focusing on sales of existing homes, looking for a recovery for housing, are looking at the wrong number. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing. I'll have more later ...


All current Existing Home Sales graphs

by Calculated Risk on 7/19/2012 08:37:00 AM

The DOL reports:

In the week ending July 14, the advance figure for seasonally adjusted initial claims was 386,000, an increase of 34,000 from the previous week's revised figure of 352,000. The 4-week moving average was 375,500, a decrease of 1,500 from the previous week's revised average of 377,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined to 375,500.

The sharp decline last week due to onetime factors, and some increase was expected.

And here is a long term graph of weekly claims:

This was well above the consensus forecast of 365,000 and suggests ongoing weakness in the labor market.


All current Employment Graphs

by Calculated Risk on 7/18/2012 09:31:00 PM

Existing home sales for June is the key release on Thursday. Most of the focus will be on sales, but the key numbers are inventory and months-of-supply.

• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand.

• At 10:00 AM, Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for sales of 4.65 million on seasonally adjusted annual rate (SAAR) basis, up from 4.55 million in May.


• Also at 10:00 AM, Philly Fed Survey for July will be released. This survey really surprised to the downside in June, and the consensus is for a reading of -8.0, up from -16.6 last month (below zero indicates contraction).

• Also at 10:00 AM, the Conference Board Leading Indicators for June will be released. The consensus is for a 0.1% decrease in this index.

Earlier:
• Housing Starts increased to 760 thousand in June, Highest since October 2008
• Starts and Completions: Multi-family and Single Family
• August 1st QE3 Departure Date?