by Calculated Risk on 4/29/2014 06:54:00 PM

From Goldman Sachs economist Kris Dawsey: FOMC Preview: A Bit Brighter

The April FOMC meeting will probably be a quiet one compared with the March meeting, with no press conference or Summary of Economic Projections (SEP) to be released. We anticipate that the Fed will want to make relatively few changes to the statement, especially in the monetary policy paragraphs. The largest changes will probably occur in the first paragraph on economic activity, reflecting the passing drag from adverse weather.
...
Regarding the FOMC's policy decision, a further $10bn/month tapering of asset purchases is almost a foregone conclusion, split equally between Treasuries and MBS. This would bring the monthly purchase amount down to $45bn ($25bn Treasuries and $20bn MBS), to take effect in May. ...

It appears likely that Minneapolis Fed President Kocherlakota—who lodged a dovish dissent at the March meeting—will not dissent to the April statement, based on a recent interview.

Wednesday:
• 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 April. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in April, up from 191,000 in March.

• At 8:30 AM, Q1 GDP (advance estimate). This is the advance estimate of Q1 GDP from the BEA. The consensus is that real GDP increased 1.1% annualized in Q1.

• At 9:45 AM, the Chicago Purchasing Managers Index for April. The consensus is for an increase to 56.9, up from 55.9 in March.

• At 2:00 PM, the FOMC Meeting Announcement. No change in interest rates is expected (for a long time). However the FOMC is expected to reduce QE3 asset purchases by $10 billion per month at this meeting.

by Calculated Risk on 4/29/2014 03:12:00 PM

This is an exciting time to be a member of the "data tribe" (those who follow data closely and are willing to change their views based on the data). There are two new internet sites worth following: The Upshot at the NY Times, and Vox (both feeds added to right sidebar).

Here is fun piece from Neil Irwin at The Upshot: No One Cares About Economic Data Anymore. That’s Good News.

If people in your office seem to be tingling with excitement this week, it is probably because of all the big economic news on the way. The two biggest regular United States economic reports are scheduled to come out, with first-quarter gross domestic product on tap for Wednesday and April jobs numbers out on Friday. Federal Reserve policy makers are meeting Tuesday and Wednesday for one of their regular sessions to set the nation’s monetary policy. And a variety of other important data releases are coming, including personal income and spending, manufacturing and home prices.

What, no tingling? You’re not alone. Because as important as all that stuff is, it is substantially less important, and less interesting, than it has been any time in the last seven years. The economy has gotten boring, and that’s fantastic news — even if it would be even better news if that underlying growth path were a bit stronger.

Personally I'm excited about all the data to be released this week, but Irwin makes an excellent point. Most people don't feel the need to pay close attention any more.

P.S. A suggestion for The Upshot - drop the "The", just Upshot, it is cleaner.

by Calculated Risk on 4/29/2014 12:04:00 PM

From the National Multi Housing Council (NMHC): Overbuilding Overblown? Apartment Markets Expand in April NMHC Quarterly Survey

Apartment markets rebounded from a soft January, with all four indexes above the breakeven level of 50 in the latest National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. Last year’s concerns of overbuilding or lack of capital have largely eased, reflected in market tightness (56), sales volume (52), equity financing (53) and debt financing (63) all above 50 for the first time since April 2013.

“Supply appears to have ramped up enough to meet approximate ongoing demand with few, if any, signs of irrational exuberance,” said NMHC Senior Vice President of Research and Chief Economist Mark Obrinsky. “A handful of submarkets are facing a temporary surge in new deliveries that may put downward pressure on occupancy rates or rent growth. However, increased development costs could well keep a lid on new supply.”
...
The Market Tightness Index rose from 41 to 56. Almost half (47 percent) of respondents reported unchanged conditions, and approximately one-third (32 percent) saw conditions as tighter than three months ago, in contrast with January’s survey, where almost one-third saw conditions as looser than three months ago. This is the first time the index has indicated overall improving conditions since July 2013.
emphasis added

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. The quarterly increase was small, but indicates tighter market conditions.  

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010. This survey has been bouncing around 50 - and now suggests vacancy rates might be close to a bottom.

by Calculated Risk on 4/29/2014 10:17:00 AM

The Census Bureau released the Housing Vacancies and Homeownership report for Q1 2014 this morning.

This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate,except as a guide to the trend.

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate decreased to 64.8% in Q1, from 65.2% in Q4.

I'd put more weight on the decennial Census numbers - and given changing demographics, the homeownership rate is probably close to a bottom.

The HVS homeowner vacancy decreased to 2.0% in Q1. 

It isn't really clear what this means. Are these homes becoming rentals?

Once again - this probably shows that the general trend is down, but I wouldn't rely on the absolute numbers.

The rental vacancy rate increased slightly in Q1 to 8.3% from 8.2% in Q4.

I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the rental vacancy rate - and Reis reported that the rental vacancy rate is at the lowest level since 2001 - and might be close to a bottom.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey. Unfortunately many analysts still use this survey to estimate the excess vacant supply. However this does suggest that most of the bubble excess is behind us.

by Calculated Risk on 4/29/2014 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February prices).

This release includes prices for 20 individual cities, and two composite indices (for 10 cities and 20 cities).

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: Home Prices Defy Weak Sales Numbers According to the S&P/Case-Shiller Home Price Indices

Data through February 2014, released today by S&P Dow Jones Indices for its S&P/Case-Shiller1 Home Price Indices, the leading measure of U.S. home prices, show that the annual rates of gain slowed for the 10-City and 20-City Composites. The Composites posted 13.1% and 12.9% in the twelve months ending February 2014.

Both Composites remained relatively unchanged month-over-month. Thirteen of the twenty cities declined in February. Cleveland had the largest decline of 1.6% followed by Chicago and Minneapolis at -0.9%. Las Vegas posted -0.1%, marking its first decline in almost two years. Tampa showed its largest decline of 0.7% since January 2012.

“Prices remained steady from January to February for the two Composite indices,” says David M. Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices. “The annual rates cooled the most we’ve seen in some time. The three California cities and Las Vegas have the strongest increases over the last 12 months as the West continues to lead. Denver and Dallas remain the only cities which have reached new post-crisis price peaks. The Northeast with New York, Washington and Boston are seeing some of the slowest year-over-year gains. However, even there prices are above their levels of early 2013. On a month-to-month basis, there is clear weakness. Seasonally adjusted data show prices rose in 19 cities, but a majority at a slower pace than in January.

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10 and Composite 20 indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 18.9% from the peak, and up 0.9% in February (SA). The Composite 10 is up 22.8% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 18.1% from the peak, and up 0.8% (SA) in February. The Composite 20 is up 23.4% from the post-bubble low set in Jan 2012 (SA).

The second graph shows the Year over year change in both indices.

The Composite 10 SA is up 13.1% compared to February 2013.

The Composite 20 SA is up 12.9% compared to February 2013.

Prices increased (SA) in 19 of the 20 Case-Shiller cities in February seasonally adjusted.  (Prices increased in 7 of the 20 cities NSA) Prices in Las Vegas are off 44.5% from the peak, and prices in Denver and Dallas are at new highs (SA).

This was at the consensus forecast for a 13.0% YoY increase. I'll have more on prices later.