by Calculated Risk on 4/02/2014 07:01:00 AM

From the MBA: Mortgage Purchase Applications Increase in Latest MBA Weekly Survey

Mortgage applications decreased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 28, 2014. ...

The Refinance Index decreased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) was unchanged at 4.56 percent, with points increasing to 0.31 from 0.29 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down 73% from the levels in May 2013.

With the mortgage rate increases, refinance activity will be significantly lower in 2014 than in 2013.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 19% from a year ago.

The purchase index is probably understating purchase activity because small lenders tend to focus on purchases, and those small lenders are underrepresented in the purchase index - but this is still very weak.

by Calculated Risk on 4/01/2014 08:07:00 PM

There has been a debate about whether the recent economic weakness was weather related or something more serious. Readers of Atif Mian and Amir Sufi's House of Debt were fairly confident much of the weakness was weather related.

In mid-March, Mian and Sufi wrote: Weakening Economy or Just Bad Winter?

We use state-level data on new auto purchases to attack this question. Here is the basic idea. Not all states experienced a horrible January 2014 — in fact, much of the western part of the country actually was warmer than normal. We can use this variation across the country in January weather to see if national auto sales were brought down by states that experienced abnormally cold temperatures.
...
The evidence is pretty clear. New auto purchases in January 2014 were more than 5% down in states that were more than 7 degrees below their normal January temperature. New auto purchases were down slightly in states that were between -7 and -4 degrees below normal. In the rest of the country where temperatures were closer to normal, new auto purchases were quite strong.

Bottom line: the weather had a significant impact on auto sales. And their follow-up today (following the strong auto sales report): Auto Sales and Weather

Our post three weeks ago on the weather and auto sales argued that bad winter weather was responsible for the slowdown in consumer spending. ... We concluded: “When it comes to durable goods such as cars, it is likely that purchases will increase sharply when the weather improves in the states that had extremely cold winters.”

We now have an out-of-sample test of our conclusion: March estimates of new auto sales are out, and they are higher than at any other point since 2007.

Wednesday:
• Early: Reis Q1 2014 Apartment Survey of rents and vacancy rates.

• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for March. This report is for private payrolls only (no government). The consensus is for 190,000 payroll jobs added in March, up from 139,000 in February.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for February. The consensus is for a 0.8% increase in February orders.

by Calculated Risk on 4/01/2014 05:45:00 PM

Notes: This CoreLogic House Price Index report is for February. The recent Case-Shiller index release was for January. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports Home Prices Rise by 12.2 Percent Year Over Year in February

Home prices nationwide, including distressed sales, increased 12.2 percent in February 2014 compared to February 2013. This change represents 24 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 0.8 percent in February 2014 compared to January 2014.

Excluding distressed sales, home prices nationally increased 10.7 percent in February 2014 compared to February 2013 and 0.9 percent month over month compared to January 2014.

... the forecast indicates that home prices, including distressed sales, are expected to increase 10.5 percent year over year from March 2013 to March 2014.

“As the spring home-buying season kicks off, house price appreciation continues to be strong,” said Dr. Mark Fleming, chief economist for CoreLogic. “Although prices should remain strong in the near term due to a short supply of homes on the market, price increases should moderate over the next year as home equity releases pent-up supply.”

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 0.8% in January, and is up 12.2% over the last year.  This index is not seasonally adjusted, so this was a strong month-to-month gain during the "weak" season.

The index is off 16.9% from the peak - and is up 23.5% from the post-bubble low set in February 2012.

The second graph is from CoreLogic. The year-over-year comparison has been positive for twenty four consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

I expect the year-over-year increases to slow - and it may show up soon since CoreLogic is forecasting a smaller year-over-year increase for March index.

by Calculated Risk on 4/01/2014 03:17:00 PM

Based on an WardsAuto estimate, light vehicle sales were at a 16.38 million SAAR in March. That is up 7.3% from March 2013, and up 7.2% from the sales rate last month. 

This was above the consensus forecast of 15.8 million SAAR (seasonally adjusted annual rate).

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for March (red, light vehicle sales of 16.38 million SAAR from WardsAuto).

Severe weather clearly impacted sales in January and February, and some of the increase in March was probably a bounce back due to better weather.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and were a key driver of the recovery.   

Looking forward, the growth rate will slow for auto sales, and most forecasts are for around a small gain in 2014 to around 16.1 million light vehicles. 

by Calculated Risk on 4/01/2014 11:09:00 AM

The Census Bureau reported that overall construction spending increased in February:

The U.S. Census Bureau of the Department of Commerce announced today that construction spending during February 2014 was estimated at a seasonally adjusted annual rate of $945.7 billion, 0.1 percent above the revised January estimate of $944.6 billion. The February figure is 8.7 percent above the February 2013 estimate of $869.9 billion.

Both private and public spending increased slightly in February:

Spending on private construction was at a seasonally adjusted annual rate of $680.0 billion, 0.1 percent above the revised January estimate of $679.1 billion. ...

In February, the estimated seasonally adjusted annual rate of public construction spending was $265.7 billion, 0.1 percent above the revised January estimate of $265.5 billion.
emphasis added

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending is 47% below the peak in early 2006, and up 58% from the post-bubble low.

Non-residential spending is 23% below the peak in January 2008, and up about 42% from the recent low.

Public construction spending is now 18% below the peak in March 2009 and up less than 1% from the recent low.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is now up 14%. Non-residential spending is up 12% year-over-year. Public spending is down slightly year-over-year.

To repeat a few key themes:
1) Private residential construction is usually the largest category for construction spending, and is now the largest category once again.  Usually private residential construction leads the economy, so this is a good sign going forward.

2) Private non-residential construction spending usually lags the economy.  There was some increase this time for a couple of years - mostly related to energy and power.  Now the key sectors of office, retail and hotels are starting to increase, but from very low levels.   As an example, lodging construction spending was up 40% year-over-year, office spending up 19%, and retail spending up 18% year-over-year.

Based on the architecture billings index, I expect private non-residential to increase further this year.

3) Public construction spending was up slightly in February, but is only up 1% from the low in April 2013.  It appears that the drag from public construction spending is over.  Public spending has declined to 2006 levels (not adjusted for inflation) and was a drag on the economy for 4+ years. In real terms, public construction spending has declined to 2001 levels.

Looking forward, all categories of construction spending should increase in 2014. Residential spending is still very low, non-residential is starting to pickup, and public spending appears to have bottomed.