by Calculated Risk on 7/23/2014 10:35:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Momentum Increasing for Architecture Billings Index

The Architecture Billings Index (ABI) is signaling improving conditions for the overall design and construction industry. 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 June ABI score was 53.5, up from a mark of 52.6 in May. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 66.4, up noticeably from the reading of 63.2 the previous month and its highest level in a calendar year.

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 June was 55.7 – the highest mark since that indicator starting being measured in October 2010.

“The recent surge in both design contracts and general inquiries for new projects by prospective clients is indicative of a sustainable strengthening across the construction marketplace,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “With the first positive reading since last summer in billings at institutional firms, it appears that design activity for all major segments of the building industry is growing. The challenge now for architecture firms seems to be finding the right balance for staffing needs to meet increasing demand.”

• Regional averages: Midwest (56.3), South (53.9), Northeast 51.1) , West (48.7) [three month average]
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 53.5 in June, up from 52.6 in May. Anything above 50 indicates expansion in demand for architects' services.  This index has indicated expansion during 18 of the last 23 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.  So the readings over the last year suggest some increase in CRE investment this year and in 2015.

by Calculated Risk on 7/23/2014 09:16:00 AM

According to Black Knight's First Look report for June, the percent of loans delinquent increased slightly in June compared to May, and declined by 15.0% year-over-year.

Also the percent of loans in the foreclosure process declined further in June and were down 36% over the last year.  Foreclosure inventory was at the lowest level since May 2008.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 5.70% in June, up seasonally from 5.62% in May. The normal rate for delinquencies is around 4.5% to 5%. The increase in delinquencies was in the 'less than 90 days' bucket.

The percent of loans in the foreclosure process declined to 1.88% in June from 1.91% in May.  

The number of delinquent properties, but not in foreclosure, is down 445,000 properties year-over-year, and the number of properties in the foreclosure process is down 507,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for June in early August.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	June 2014	May 2014	June 2013
Delinquent	5.70%	5.62%	6.68%
In Foreclosure	1.88%	1.91%	2.93%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,728,000	1,670,000	1,983,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,155,000	1,169,000	1,345,000
Number of properties in foreclosure pre-sale inventory:	951,000	966,000	1,458,000
Total Properties	3,834,000	3,805,000	4,785,000

by Calculated Risk on 7/23/2014 07:01:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 2.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 18, 2014. ...

The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 0.3 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.33 percent, with points increasing to 0.23 from 0.20 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index.

The refinance index is down 74% from the levels in May 2013.

As expected, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 15% from a year ago.

by Calculated Risk on 7/22/2014 09:48:00 PM

Earlier today, the Richmond Fed manufacturing survey for July was released: Manufacturing Sector Activity Expanded; Shipments Grew Mildly, Hiring Picked Up

Overall, manufacturing conditions strengthened. The composite index for manufacturing moved up to a reading of 7 following last month's reading of 4. The index for shipments gained one point, ending at 3. New orders grew at the same pace as a month ago, with that index finishing at a reading of 5. ...

Manufacturing employment strengthened this month, with the index gaining nine points to finish at 13. The average workweek grew at a slower pace this month; moving that gauge down two points to end at 3. Average wages advanced compared to a month ago, ending at 16.

This is the 3rd regional survey released for July (NY and Philly were released last week) and all three surveys were strong this month.

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• During the day: The AIA's Architecture Billings Index for June (a leading indicator for commercial real estate).

by Calculated Risk on 7/22/2014 05:09:00 PM

The BLS reported this morning:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.0 percent over the last 12 months to an index level of 234.702 (1982-84=100). For the month, the index rose 0.2 percent prior to seasonal adjustment.

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U, and is not seasonally adjusted (NSA).

Since the highest Q3 average was last year (Q3 2013), at 230.327, we only have to compare to last year. 

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 2.0% year-over-year in June, and although this is very early - we need the data for July, August and September - my current guess is COLA will be higher than the previous two years, and will probably be a little over 2% this year.

Contribution and Benefit Base

The contribution base will be adjusted using the National Average Wage Index. This is based on a one year lag. The National Average Wage Index is not available for 2013 yet, but wages probably increased again in 2013. If wages increased the same as last year, then the contribution base next year will be increased to around $120,500 from the current $117,000.

Remember - this is an early look. What matters is average CPI-W for all three months in Q3 (July, August and September).