by Calculated Risk on 4/25/2014 11:01:00 AM

The BEA is scheduled to release the advance estimate for Q1 Gross Domestic Product (GDP) next week on Wednesday, April 30th. The consensus forecast is for real GDP to increase 1.1% in Q1 (from Q4, annualized). Here are a few forecasts:

From Kris Dawsey at Goldman Sachs:

Despite GDP likely growing at an anemic rate of around 1.0% in Q1, we remain optimistic about the rest of 2014. The core narrative for a pickup in growth this year has not changed. The fiscal drag is still lower, consumer spending should still strengthen, and business investment seems poised for a comeback. We see the weakness in Q1 as mainly driven by temporary factors, including a large drag from weather and inventories. The recent encouraging dataflow—with the exception of some of the housing numbers—appears consistent with our forecast for a near-term pickup. For the remainder of 2014, 3%+growth remains our baseline. ...

We forecast 1.8% growth in real final sales in Q1 (GDP growth excluding the effects of the volatile inventories category). ... Inventory investment was a significant positive contributor to growth in 2013, adding 3/4 percentage point to growth over the four quarters of the year. ... In Q1, the rate of real inventory accumulation appears to have moderated based on the incoming data on manufacturing, wholesale, and retail inventories, which will be a drag on Q1 GDP growth.
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From Merrill Lynch:

We think the first estimate of 1Q GDP will show sluggish growth of only 1.2% qoq saar. A large part of the weakness owes to the cold weather which held back economic activity in the beginning of the year. Inventories are also being drawn down, albeit gradually, as businesses were caught with excess stockpiles. We estimate that inventories will slice 0.6pp from growth, matching the drag to the economy from a wider trade deficit. Residential investment is also likely to contract, reflecting the decline in home sales and sluggish housing starts. ... We think momentum will improve in the spring, setting the stage for a rebound in 2Q with growth above 3.0%.

For the first release of 1Q GDP, we are looking for relatively soft readings on key inflation metrics in this report. Specifically, we expect both the GDP deflator and the core PCE deflator to rise 1.3% qoq saar for 1Q.

From Nomura:

Disregard the backward-looking Q1 GDP, April data should show the recovery taking off. ... Weather weighed on economic activity early in the year. This should be reflected in a markedly slower pace of GDP growth in Q1. We expect GDP to grow at an annualized rate of 0.9% in Q1, compared with 2.6% in Q4.

And on the April employment report to be released next Friday, the consensus is for 210 thousand payroll jobs added with Merrill forecasting 215 thousand and Nomura forecasting 225 thousand.

by Calculated Risk on 4/25/2014 09:58:00 AM

Click on graph for larger image.

The final Reuters / University of Michigan consumer sentiment index for April increased to 84.1 from the March reading of 80.0, and was up from the preliminary April reading of 82.6.

This was above the consensus forecast of 82.5. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011, and another smaller spike down last October and November due to the government shutdown.

I expect to see sentiment at post-recession highs very soon.

by Calculated Risk on 4/24/2014 08:08:00 PM

From Nick Timiraos at the WSJ: Demand for Home Loans Plunges

Lenders originated $235 billion in mortgage loans during the January-March quarter, down 58% from the same period a year ago and down 23% from the fourth quarter of 2013, according to industry newsletter Inside Mortgage Finance.
...
The decline in mortgage lending last quarter stemmed almost entirely from the slide in refinancing. Loans for home purchases were basically flat from a year earlier and down from the fourth quarter.
...
The top 25 lenders accounted for 63.9% of all originations in the first quarter, also a 14-year low. That is down from 65.3% at the end of last year and a high of 90.9% in 2008, according to Inside Mortgage Finance.

Note: Many of the smaller lenders focus on the home purchase market and many of these small lenders are not included in the weekly MBA index. That is why the MBA purchase index is down about 18% year-over-year, but actual purchase activity is flat (according to Inside Mortgage Finance).

Friday:
• At 9:55 AM ET, the Reuter's/University of Michigan's Consumer sentiment index (final for April). The consensus is for a reading of 82.5, down from the preliminary reading of 82.6, but up from the March reading of 80.0.

by Calculated Risk on 4/24/2014 03:29:00 PM

D.R. Horton, the nation’s largest home builder, reported that net home orders in the quarter ended March 31, 2014 totaled 8,569, up 8.8% from the comparable quarter of 2013. Horton’s average community count last quarter was up 11% from a year ago. The company’s sales cancellation rate, expressed as a % of gross orders, was 19%, unchanged from a year ago. Home deliveries totaled 6,194 last quarter, up 13.4% from the comparable quarter, at an average sales price of $271,230, up 11.8% from a year ago. The company’s order backlog at the end of March was 10,059, up 5.3% from last March.

In response to overall weak demand from first-time home buyer, partly attributable in home price increases over the past two years, Horton announced in its conference call that is initiating a new product line called “express homes,” which will be smaller and priced lower than its current product lines and will be targeted to first-time buyers. An official said that first-time home buyers represented 42% of the purchase mortgages handled by its mortgage subsidiary last quarter, down from 50% in the comparable quarter of 2013. An official also said that the company increased sales incentives “some, but not significantly,” last quarter.

D.R. Horton’s results were stronger than consensus.

PulteGroup, the nation’s second largest home builder, reported that net home orders in the quarter ended March 31, 2014 totaled 4,863, down 6.5% from the comparable quarter of 2013. While net orders were down from a year ago, the company said that absorptions per community were up from last year. (Pulte has focused more on returns and less on expansion). Home deliveries last quarter totaled 3,436, down 10.4% from the comparable quarter of 2013, at an average sales price of $317,000, up 10.5% from a year ago. The company’s order backlog at the end of March was 7,199, down 8% from last March. Company officials noted that absorption rates per community were up significantly from a year ago in its lower-priced Centex division, but that this gain mainly reflected the strong Texas market, and not strength in first-time home buyer demand.

The Ryland Group, the nation’s eighth largest home builder, reported that net home orders in the quarter ended March 31, 2014 totaled 2,186, up 6.5% from the comparable quarter of 2013. Ryland’s community count in March was up 18.8% from last March, and the company’s average sales absorption rate per community last quarter was down by over 10% from a year ago. The company’s sales cancellation rate, expressed as a % of gross orders, was 15.3%, little changed from 15.4% a year earlier. Home deliveries last quarter totaled 1,470, up 11.8% from the comparable quarter of 2013, at an average sales price of $327,000, up 18.1% from a year ago. The company’s order backlog at the end of March was 3,342, up 6.6% from last March, with an average order price of $330,000, up 14.2% from a year ago. Ryland owned or controlled 39,482 lots at the end of March, up 30.3% from last March and up 69.5% from two years ago.

M/I Homes, the nation’s 16th largest home builder, reported that net home orders in the quarter ended March 31, 2014 totaled 982, down 6.2% from the comparable quarter of 2013. M/I’s average community count last quarter was 158, up 17.0% from the comparable quarter of 2013, and the company’s net sales per community last quarter were down 21% from a year ago. The company’s sales cancellation rate, expressed as a % of gross orders, was 16% last quarter up slightly from 15% a year earlier. Home deliveries last quarter totaled 737, up 17.5% from the comparable quarter of 2013, at an average sales price of $299,000, up 5.3% from a year ago. The company’s order backlog at the end of March was 1,525, up 10.1% from last March. M/I owned or controlled 20,965 lots at the end of March, up 28.2% from a year ago.

Here is a summary of some results from large, publicly-traded builders

	Net Orders			Settlements			Average Closing Price
Qtr. Ended:	3/14	3/13	% Chg	3/14	3/13	% Chg	3/14	3/13	% Chg
D.R. Horton	8,569	7,879	8.8%	6,194	5,463	13.4%	$271,230	$242,548	11.8%
Pulte Group	4,863	5,200	-6.5%	3,436	3,833	-10.4%	$317,000	$287,000	10.5%
NVR	3,325	3,510	-5.3%	2,211	2,272	-2.7%	$361,400	$330,400	9.4%
The Ryland Group	2,186	2,052	6.5%	1,470	1,315	11.8%	$327,000	$277,000	18.1%
Meritage Homes	1,525	1,547	-1.4%	1,109	1,052	5.4%	$365,896	$314,363	16.4%
M/I Homes	982	1,047	-6.2%	737	627	17.5%	$299,000	$284,000	5.3%
Total	21,450	21,235	1.0%	15,157	14,562	4.1%	$308,445	$278,040	10.9%

by Calculated Risk on 4/24/2014 03:12:00 PM

From HotelNewsNow.com: US hotels report occupancy, RevPAR decreases

The U.S. hotel industry reported occupancy and revenue-per-available-room decreases during the week of 13-19 April 2014, according to data from STR, parent company of Hotel News Now.

Overall, in year-over-year measurements, the industry’s occupancy decreased 2.7% to 62.8%. RevPAR decreased 0.3% to $70.58. Average daily rate increased 2.5% to $112.37.
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Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The weekly decline was probably related to the timing of Easter, however the 4-week average of the occupancy rate is solidly above the median for 2000-2007, and is at the highest level since 2000. 

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2014 and black is for 2009 - the worst year since the Great Depression for hotels.

Through April 19th, the 4-week average of the occupancy rate is tracking higher than pre-recession levels.   


Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com