by Calculated Risk on 6/13/2014 10:31:00 AM

Here are some analyst comments on the upcoming FOMC meeting. From Nomura:

At the conclusion of the 17-18 June Federal Open Market Committee (FOMC) meeting, we expect the FOMC to announce another $10bn reduction in its asset purchase program. We will look to see if there is any mention of discussions around the exit strategy in the statement or in Chair Yellen’s press conference. We will also look out for any mention of the pace of adjustment when the Committee begins to raise rates. The Summary of Economic Projections (SEP) will also be released. Notably, based on the weak Q1 GDP numbers, we expect to see a downward revision to the FOMC’s GDP forecast for 2014.

And from Merrill Lynch:

The Fed is unlikely to make any meaningful policy changes in June: tapering should continue (bringing the asset purchase pace down to $35 bn per month) and the forward guidance should remain unchanged. The interesting discussions should revolve around various aspects of the exit strategy. There is some chance that Fed Chair Janet Yellen addresses aspects at her press conference, but more likely, we will have to wait until the minutes to get any details. ...

At this point, it would take a significant shift in the outlook to change the pace of tapering. In all likelihood, the Fed will taper $10 bn each in June, July, and September, leaving a $15 bn purchase pace at the October meeting. If the economy is deemed strong enough, they could taper the full amount then. Alternatively, should they want to hammer home a message of gradual exit, they could again taper $10 bn in October and then do the final $5 bn in December.

CR note: I've seen a suggestion that the FOMC might increase the pace of tapering at this meeting - they won't - and other suggestions that QE3 will never end - it will. I'll post some thoughts on the upcoming meeting this weekend.

by Calculated Risk on 6/13/2014 09:55:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for June was at 81.2, down from 81.9 in May.

This was below the consensus forecast of 83.0. 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.

by Calculated Risk on 6/12/2014 07:16:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales).  For a long time, not much changed. But over the last 2+ years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market and other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In May 2014, 14.7% of all resales (single family homes) were distressed sales. This was down from last month, and down from 29.1% in May 2013. This is the post-bubble low.

The percentage of REOs was at 7.7%, and the percentage of short sales was 7.0%.

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales over the last 2 years (blue). 

Active Listing Inventory for single family homes increased 83.7% year-over-year in May. 

Cash buyers accounted for 20.5% of all sales, down from 33.6% in May 2013, and down from 21.9% last month (frequently investors).  This has been trending down, and it appears investors are becoming less of a factor in Sacramento.

Total sales were down 10.6% from May 2013, but conventional equity sales were up 7.5% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increasing.

As I've noted before, we are seeing a similar pattern in other distressed areas.

by Calculated Risk on 6/12/2014 04:03:00 PM

From DataQuick: Bay Area Home Sales Constrained by Supply; Prices Continue to Rise

A total of 7,898 new and resale houses and condos sold in the nine-county Bay Area last month. That was up 4.5 percent from 7,555 in April and down 7.5 percent from 8,541 in May last year, according to San Diego-based DataQuick.

Bay Area sales almost always increase from April to May. On average they have risen about 7.2 percent between those two months since 1988, when DataQuick’s statistics begin. ...

Last month foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 3.1 percent of all resales, down from a revised 3.6 percent the month before, and down from 6.5 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is 9.8 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 4.7 percent of Bay Area resales last month. That was up from an estimated 4.2 percent in April and down from 10.4 percent a year earlier.

Last month absentee buyers – mostly investors – purchased 20.5 percent of all Bay Area homes. That was up a hair from April’s revised 20.4 percent and down from 22.4 percent for May a year ago.
emphasis added

A few key year-over-year trends: 1) declining distressed sales, 2) generally declining investor buying, 3) declining total sales, but 4) some increase in non-distressed sales. Though total sales were down 7.5% year-over-year, the percent of non-distressed sales was up 3%.  There were 7,898 total sales this year in May, and 7.8% were distressed.  In May 2013, there were 8,541 total sales, and 16.9% were distressed.

by Calculated Risk on 6/12/2014 01:04:00 PM

From HotelNewsNow.com: SSTR: US hotel results for week ending 7 June

In year-over-year measurements, the industry’s occupancy increased 3.1 percent to 69.1 percent. Average daily rate increased 4.2 percent to finish the week at US$114.00. Revenue per available room for the week was up 7.4 percent to finish at US$78.81.
emphasis added

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

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 for the last 15 years 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.  Note: 2001 was briefly worse than 2009 in September.

Year 2000 was the best year for hotel occupancy until late in the year when 2005 had the highest occupancy rate (due to hurricane Katrina).

Right now it looks like 2014 will be the best year since 2000 for hotels.

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