by Calculated Risk on 5/15/2014 08:39:00 PM

A reminder of a friendly bet I made with NDD on housing starts in 2014:

If starts or sales are up at least 20% YoY in any month in 2014, [NDD] will make a $100 donation to the charity of Bill's choice, which he has designated as the Memorial Fund in honor of his late co-blogger, Tanta. If housing permits or starts are down 100,000 YoY at least once in 2014, he make a $100 donation to the charity of my choice, which is the Alzheimer's Association.

Of course, with the terms of the bet, we could both "win" at some point during the year. (I expect to "win" soon).

In April 2013, starts were at a 852 thousand seasonally adjusted annual rate (SAAR). For me to win, starts would have to be up 20% or at 1.022 million SAAR in April (possible). For NDD to win, starts would have to fall to 752 thousand SAAR (not likely). NDD could also "win" if permits fall to 790 thousand SAAR from 905 thousand SAAR in April 2013 (possible).

Friday:
• At 8:30 AM, Housing Starts for April. Total housing starts were at 946 thousand (SAAR) in March. Single family starts were at 635 thousand SAAR in March. The consensus is for total housing starts to increase to 980 thousand (SAAR) in April.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for May). The consensus is for a reading of 84.5, up from 84.1 in April.

• At 10:00 AM, Regional and State Employment and Unemployment (Monthly) for April 2014.

by Calculated Risk on 5/15/2014 04:55:00 PM

Note: The year-over-year change increased in April, but it is important to note that CPI declined in April 2013 (and core CPI was essentially unchanged) - and April 2013 was dropped out of the calculation this month so some increase in the year-over-year change was expected. Looking forward, I think inflation (year-over-year) will increase a little this year as growth picks up, but too much inflation will not be a concern this year.

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% (3.2% annualized rate) in April. The 16% trimmed-mean Consumer Price Index also increased 0.2% (2.9% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.2% annualized rate) in April. The CPI less food and energy increased 0.2% (2.9% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for April here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.2%, the trimmed-mean CPI rose 1.8%, and the CPI less food and energy rose 1.8%. Core PCE is for March and increased just 1.2% year-over-year.

On a monthly basis, median CPI was at 3.2% annualized, trimmed-mean CPI was at 2.9% annualized, and core CPI increased 2.9% annualized.

In general these measures suggest inflation remains below the Fed's target.

by Calculated Risk on 5/15/2014 01:48:00 PM

From the Philly Fed: May Manufacturing Survey

The diffusion index of current general activity decreased slightly from a reading of 16.6 in April to 15.4 this month. The index has remained positive for three consecutive months, following the weather‐influenced negative reading in February.
...
Indicators suggest slightly improved labor market conditions this month. The employment index remained positive for the 11th consecutive month but increased only 1 point [to 7.8].
emphasis added

This was above the consensus forecast of a reading of 12.5 for May.

From the NY Fed: Empire State Manufacturing Survey

Business conditions improved significantly for New York manufacturers, according to the May 2014 survey. On the heels of a rather weak reading of just 1.3 in April, the general business conditions index shot up eighteen points to 19.0, its highest level since mid-2010. ...

Employment expanded significantly; although the average workweek index held steady at 2.2, the index for number of employees rose thirteen points to 20.9. Indexes for the six-month outlook were highly optimistic, with the future general business conditions index rising to 44.0, its highest level in more than two years.

This was well above the consensus forecast of 5.0

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 May. The ISM and total Fed surveys are through April.

The average of the Empire State and Philly Fed surveys is at the highest level since 2011, and this suggests stronger expansion in the ISM report for May.

by Calculated Risk on 5/15/2014 10:55:00 AM

Catching up: The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 45 in May, down from 46 in April. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Remains in Holding Pattern

Builder confidence in the market for newly built, single-family homes in May fell one point to 45 from a downwardly revised April reading of 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.
...
“Builders are waiting for consumers to feel more secure about their financial situation,” said NAHB Chief Economist David Crowe. “Once job growth becomes more consistent, consumers will return to the market in larger numbers and that will boost builder confidence.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The index’s components were mixed in May. The component gauging sales expectations in the next six months rose one point to 57 and the component measuring buyer traffic increased two points to 33. The component gauging current sales conditions fell two points to 48.

Looking at the three-month moving averages for regional HMI scores, the South rose one point to 48 while the Midwest fell a single point to 47 and the West posted a four-point drop to 47. The Northeast held steady at 33.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was the fourth consecutive reading below 50.

by Calculated Risk on 5/15/2014 10:00:00 AM

From the MBA: Delinquency and Foreclosure Rates Continue to Improve

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.11 percent of all loans outstanding at the end of the first quarter of 2014, the lowest level since the fourth quarter of 2007. The delinquency rate decreased 28 basis points from the previous quarter, and 114 basis points from one year ago, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the first quarter was 2.65 percent, down 21 basis points from the fourth quarter and 90 basis points lower than one year ago. This was the lowest foreclosure inventory rate seen since the first quarter of 2008.

The percentage of loans on which foreclosure actions were started during the first quarter fell to 0.45 percent from 0.54 percent, a decrease of nine basis points, and the lowest level since the second quarter of 2006.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 5.04 percent, a decrease of 37 basis points from last quarter, and a decrease of 135 basis points from the first quarter of last year. Similar to the previous quarter, 75 percent of seriously delinquent loans were originated in 2007 and earlier, with another 20 percent originated between 2008 and 2010. Loans originated in 2011 and later only accounted for five percent of all seriously delinquent loans.

“We are seeing sustained and significant improvement in overall mortgage performance,” said Mike Fratantoni, MBA’s Chief Economist. “A more stable and stronger job market, coupled with strong credit standards on new loans, has kept delinquency rates on recent vintages low, while the portfolio of loans made pre-crisis is steadily being resolved. Increasing home prices, caused by tight inventories of homes for sale, have helped build an equity cushion for many new borrowers and have helped some homeowners who had been underwater regain positive equity in their properties. The increase in values also helps to facilitate sales of distressed properties, which may further expedite the pace of resolution of pre-crisis loans.”

“Judicial states continue to account for the majority of loans in foreclosure, making up almost 70 percent of loans in foreclosure, while only representing about 40 percent of loans serviced. Of the 17 states that had a higher foreclosure inventory rate than the national average, 15 of those were judicial states. While the percentages of loans in foreclosure dropped in both judicial and non-judicial states, the average rate for judicial states was 4.6 percent compared to the average rate of 1.4 percent for non-judicial states.

“New Jersey, a state with a judicial foreclosure system, was the only state in the nation to see an increase in loans in foreclosure over the previous quarter and now has the highest percentage of loans in foreclosure in the nation with eight percent of its loans in the foreclosure process. New Jersey also had the highest percentage of new foreclosures started in the first quarter of 2014, but also had a significant drop in its loans that were 90+ days delinquent, a sign that a large portion of loans previously held in the 90+ day delinquency category entered the foreclosure process during the quarter. emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.

Loans 30 days delinquent decreased to 2.70% from 2.89% in Q4. This is a normal level.

Delinquent loans in the 60 day bucket decreased to 1.00% in Q1, from 1.06% in Q4. This is slightly above normal.

The 90 day bucket decreased to 2.41% from 2.45%. This is still way above normal (just under 1.0% would be normal according to the MBA).

The percent of loans in the foreclosure process decreased to 2.65% from 2.86% and is now at the lowest level since Q1 2008.

This survey has shown steady improvement in delinquency and foreclosure rates, but it will take a few more years to work through the backlog - especially in judicial foreclosure states.

Note 1: Most of the remaining problems are with loans made in 2007 or earlier: "75 percent of seriously delinquent loans were originated in 2007 and earlier" and are in judicial foreclosure states.

Note 2: This survey includes all mortgage loans (including terrible lending via Wall Street).  The total serious delinquency rate is 5.04% compared to 2.2% for Fannie and Freddie.