RSS Feed by Calculated Risk on 6/18/2014 06:51:00 PM
Wednesday, June 18, 2014
Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in May
Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in May.
Lawler notes that Orlando is one of a few markets in Florida where foreclosure share of sales up a decent amount from year ago.
On distressed: Total "distressed" share is down in all of these markets, mostly because of a sharp decline in short sales.
Short sales are down in all of these areas.
Foreclosures are down in most of these areas too, although foreclosures are up a little in a couple of areas.
The All Cash Share (last two columns) is mostly declining year-over-year.
As investors pull back, the share of all cash buyers will probably continue to decline.
| Short Sales Share | Foreclosure Sales Share | Total "Distressed" Share | All Cash Share | |||||
|---|---|---|---|---|---|---|---|---|
| May-14 | May-13 | May-14 | May-13 | May-14 | May-13 | May-14 | May-13 | |
| Las Vegas | 7.9% | 31.8% | 9.1% | 10.3% | 17.0% | 42.1% | 40.2% | 57.9% |
| Reno** | 11.0% | 27.0% | 6.0% | 7.0% | 17.0% | 34.0% | ||
| Phoenix | 3.9% | 12.3% | 6.7% | 9.7% | 10.7% | 22.0% | 29.5% | 38.9% |
| Sacramento | 7.0% | 22.5% | 8.3% | 7.5% | 15.3% | 30.0% | 20.5% | 33.6% |
| Minneapolis | 3.9% | 6.8% | 12.1% | 19.9% | 16.0% | 26.7% | ||
| Mid-Atlantic | 5.2% | 8.2% | 8.1% | 7.2% | 13.3% | 15.5% | 17.2% | 16.7% |
| Orlando | 9.2% | 22.1% | 24.7% | 19.0% | 34.0% | 41.2% | 43.8% | 53.9% |
| California * | 6.0% | 11.3% | 6.9% | 15.0% | 12.9% | 26.3% | ||
| Bay Area CA* | 4.7% | 10.4% | 3.1% | 6.5% | 7.8% | 16.9% | 22.9% | 27.6% |
| So. California* | 6.6% | 15.7% | 5.8% | 10.9% | 12.4% | 26.6% | 25.8% | 32.6% |
| Hampton Roads | 21.3% | 26.3% | ||||||
| Northeast Florida | 36.5% | 37.8% | ||||||
| Toledo | 36.6% | 33.8% | ||||||
| Wichita | 24.3% | 23.0% | ||||||
| Des Moines | 17.5% | 17.3% | ||||||
| Tucson | 31.3% | 32.8% | ||||||
| Omaha | 19.4% | 14.1% | ||||||
| Pensacola | 32.6% | 32.1% | ||||||
| Georgia*** | 26.0% | NA | ||||||
| Peoria | 19.6% | 21.7% | ||||||
| Georgia*** | 26.0% | NA | ||||||
| Spokane | ||||||||
| Houston | 4.5% | 9.4% | ||||||
| Memphis* | 15.9% | 21.5% | ||||||
| Birmingham AL | ||||||||
| *share of existing home sales, based on property records **Single Family Only ***GAMLS | ||||||||
Lawler: Early Look at Existing Home Sales in May
by Calculated Risk on 6/18/2014 03:48:00 PM
From housing economist Tom Lawler:
Based on local realtor/MLS reports across the country, I estimate that US existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.81 million in May, up 3.4% from April’s preliminary estimate (which I believe was too low – see below), but down 6.6% from last May’s pace. Folks who track local realtor reports and look at YOY declines in unadjusted data might be surprised by a May estimate showing a decent-sized monthly pickup in seasonally adjusted sales, as the YOY decline in unadjusted sales in May appears to be similar to (or even a tad larger) than that in April. However, (1) seasonally adjusted sales last May were 3.2% higher than last April; and (2) there was one fewer business day this May compared to last May, and business-day count affects the NAR’s seasonal adjustment factor.
Trying to use publicly-available realtor/MLS reports to project the NAR’s inventory estimate is very challenging in the spring. As I’ve written about before, the NAR inventory number from March to April always shows a substantially larger increase than realtor/MLS reports (or listings data) would suggest, while the April to May change is always lower than realtor/MLS reports (or listings data) would suggest. I’m not sure why, but I’m guessing it is related to differences in the “pull dates” of the NAR reports and the publicly-released reports. Realtor/MLS reports for May, however, clearly indicate that national listings showed a higher YOY increase in May than in April, and my “best guess” in that the NAR’s existing home inventory for May will be about 2.32 million, up 7.9% from last May.
Finally, I estimate that the NAR will estimate that the median existing SF home sales price in May was up by about 3% from last May.
Flipping back to April, local realtor/MLS reports strongly suggest that the NAR’s estimate for existing home sales in April – 4.65 million (SAAR) – was too low, with all of the understatement coming from the South region. I have local realtor/MLS reports from across the South region for April covering a total of over 108,000 sales, and these reports suggest that home sales in the South in April were unchanged from the previous April on an unadjusted basis. The NAR, in contrast, estimates that existing home sales in the South in April were down 4.9% YOY (NSA). I’ve been using local realtor/MLS reports to project NAR data (national and by region) for many years, and I’ve never seen such a huge “gap.” To be sure, some of the publicly-available realtor/MLS reports may be wrong. By the same token, some of the official “NAR” reports may be wrong. Also, I know that a few MLS in the South changed MLS vendors and delayed their release of home sales reports in April, which could have impacted NAR estimates (though probably not by that much). While I have no clue as to whether the NAR will revise its April estimate, I feel pretty confident that the NAR’s April estimate was too low, probably by 100,000 (SAAR) or so, and I would urge the NAR to “double-check” their April numbers.
CR Note: The NAR is scheduled to release the May existing home sales report on Monday, June 23rd.
FOMC Projections and Press Conference
by Calculated Risk on 6/18/2014 02:14:00 PM
Statement here ($10 billion in additional tapering as expected).
As far as the "Appropriate timing of policy firming", participant views were mostly unchanged (12 participants expect the first rate hike in 2015, and 3 in 2016 - so one participant moved from 2015 to 2016).
The FOMC projections for inflation are still on the low side through 2016.
Yellen press conference here.
On the projections, GDP for 2014 was revised down significantly, the unemployment rate was revised down again, and inflation projections were increased slightly. Note: These projections were submitted before the most recent CPI report.
| GDP projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Change in Real GDP1 | 2014 | 2015 | 2016 |
| June 2014 Meeting Projections | 2.1 to 2.3 | 3.0 to 3.2 | 2.5 to 3.0 |
| Mar 2014 Meeting Projections | 2.8 to 3.0 | 3.0 to 3.2 | 2.5 to 3.0 |
The unemployment rate was at 6.3% in May.
| Unemployment projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Unemployment Rate2 | 2014 | 2015 | 2016 |
| June 2014 Meeting Projections | 6.0 to 6.1 | 5.4 to 5.7 | 5.1 to 5.5 |
| Mar 2014 Meeting Projections | 6.1 to 6.3 | 5.6 to 5.9 | 5.2 to 5.6 |
As of April, PCE inflation was up 1.6% from April 2013, and core inflation was up 1.4%. The FOMC expects inflation to increase in 2014, but remain below their 2% target (Note: the FOMC target is symmetrical around 2%).
| Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| PCE Inflation1 | 2014 | 2015 | 2016 |
| June 2014 Meeting Projections | 1.5 to 1.7 | 1.5 to 2.0 | 1.6 to 2.0 |
| Mar 2014 Meeting Projections | 1.5 to 1.6 | 1.5 to 2.0 | 1.7 to 2.0 |
Here are the FOMC's recent core inflation projections:
| Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents | |||
|---|---|---|---|
| Core Inflation1 | 2014 | 2015 | 2016 |
| June 2014 Meeting Projections | 1.5 to 1.6 | 1.6 to 2.0 | 1.7 to 2.0 |
| Mar 2014 Meeting Projections | 1.4 to 1.6 | 1.7 to 2.0 | 1.8 to 2.0 |
FOMC Statement: More Tapering
by Calculated Risk on 6/18/2014 02:00:00 PM
Not much change ... another $10 billion reduction in asset purchases.
FOMC Statement:
Information received since the Federal Open Market Committee met in April indicates that growth in economic activity has rebounded in recent months. Labor market indicators generally showed further improvement. The unemployment rate, though lower, remains elevated. Household spending appears to be rising moderately and business fixed investment resumed its advance, while the recovery in the housing sector remained slow. Fiscal policy is restraining economic growth, although the extent of restraint is diminishing. Inflation has been running below the Committee's longer-run objective, but longer-term inflation expectations have remained stable.
Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. The Committee expects that, with appropriate policy accommodation, economic activity will expand at a moderate pace and labor market conditions will continue to improve gradually, moving toward those the Committee judges consistent with its dual mandate. The Committee sees the risks to the outlook for the economy and the labor market as nearly balanced. The Committee recognizes that inflation persistently below its 2 percent objective could pose risks to economic performance, and it is monitoring inflation developments carefully for evidence that inflation will move back toward its objective over the medium term.
The Committee currently judges that there is sufficient underlying strength in the broader economy to support ongoing improvement in labor market conditions. In light of the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions since the inception of the current asset purchase program, the Committee decided to make a further measured reduction in the pace of its asset purchases. Beginning in July, the Committee will add to its holdings of agency mortgage-backed securities at a pace of $15 billion per month rather than $20 billion per month, and will add to its holdings of longer-term Treasury securities at a pace of $20 billion per month rather than $25 billion per month. The Committee is maintaining its existing policy of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction. The Committee's sizable and still-increasing holdings of longer-term securities should maintain downward pressure on longer-term interest rates, support mortgage markets, and help to make broader financial conditions more accommodative, which in turn should promote a stronger economic recovery and help to ensure that inflation, over time, is at the rate most consistent with the Committee's dual mandate.
The Committee will closely monitor incoming information on economic and financial developments in coming months and will continue its purchases of Treasury and agency mortgage-backed securities, and employ its other policy tools as appropriate, until the outlook for the labor market has improved substantially in a context of price stability. If incoming information broadly supports the Committee's expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings. However, asset purchases are not on a preset course, and the Committee's decisions about their pace will remain contingent on the Committee's outlook for the labor market and inflation as well as its assessment of the likely efficacy and costs of such purchases.
To support continued progress toward maximum employment and price stability, the Committee today reaffirmed its view that a highly accommodative stance of monetary policy remains appropriate. In determining how long to maintain the current 0 to 1/4 percent target range for the federal funds rate, the Committee will assess progress--both realized and expected--toward its objectives of maximum employment and 2 percent inflation. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial developments. The Committee continues to anticipate, based on its assessment of these factors, that it likely will be appropriate to maintain the current target range for the federal funds rate for a considerable time after the asset purchase program ends, especially if projected inflation continues to run below the Committee's 2 percent longer-run goal, and provided that longer-term inflation expectations remain well anchored.
When the Committee decides to begin to remove policy accommodation, it will take a balanced approach consistent with its longer-run goals of maximum employment and inflation of 2 percent. The Committee currently anticipates that, even after employment and inflation are near mandate-consistent levels, economic conditions may, for some time, warrant keeping the target federal funds rate below levels the Committee views as normal in the longer run.
Voting for the FOMC monetary policy action were: Janet L. Yellen, Chair; William C. Dudley, Vice Chairman; Lael Brainard; Stanley Fischer; Richard W. Fisher; Narayana Kocherlakota; Loretta J. Mester; Charles I. Plosser; Jerome H. Powell; and Daniel K. Tarullo.
emphasis added
AIA: Architecture Billings Index increased in May
by Calculated Risk on 6/18/2014 10:12:00 AM
Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
From AIA: Three Point Jump for Architecture Billings Index
On the heels of consecutive months of decreasing demand for design services, the Architecture Billings Index (ABI) has returned to positive territory. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 52.6, up sharply from a mark of 49.6 in April. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 63.2, up from the reading of 59.1 the previous month.
The AIA has added a new indicator measuring the trends in new design contracts at architecture firms that can provide a strong signal of the direction of future architecture billings. The score for design contracts in May was 52.5.
“Volatility continues to be the watchword in the design and construction markets, with firms in some regions of the country, and serving some sectors of the industry, reporting strong growth, while others are indicating continued weakness,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “However, overall, it appears that activity has recovered from the winter slump, and design professions should see more positive than negative numbers in the coming months.”
• Regional averages: South (58.1), Midwest (51.3), Northeast (47.6) , West (46.9) [three month average]
emphasis added
Click on graph for larger image.This graph shows the Architecture Billings Index since 1996. The index was at 52.6 in May, up from 49.6 in April. Anything above 50 indicates expansion in demand for architects' services. This index has indicated expansion during 17 of the last 22 months.
Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.
According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction. The index has been moving sideways near the expansion / contraction line recently. However, the readings over the last year suggest some increase in CRE investment in 2014.
