by Calculated Risk on 8/07/2014 01:11:00 PM

Note: Trulia corrected the Year-over-year change in the post from 8.1% to 7.8% for July.

From Trulia chief economist Jed Kolko: Home Price Gains Now Driven More By Jobs Than By Rebound Effect

The month-over-month increase in asking home prices of 0.8% was in line with the average monthly gain over the past year, settling back down after a 1.2% month-over-month in June. ... Although prices aren’t rising as fast as they did in spring 2013, price increases continue to be widespread, with 97 of 100 metros posting year-over-year price gains, and 94 posting quarter-over-quarter gains.

As the rebound effect diminishes, local housing markets need to depend more on job growth, which is a more sustainable driver of housing demand. So are they? We compared year-over-year asking price gains in July 2014 with year-over-year job gains in December 2013, from the Bureau of Labor Statistics’ Quarterly Census of Employment and Wages (QCEW) in the 100 largest U.S. metros. Clearly, housing markets with higher asking-price gains have faster job growth ... A year ago, the pattern was different: in July 2013, home price changes were more highly correlated with the peak-to-trough price decline than with job growth (year-over-year in December 2012). Over the past year, therefore, the rebound effect has weakened, and as prices continue to return to long-term normal levels the rebound effect will continue to fade. Local housing markets will rely more on jobs and wages to support housing demand and home prices – which is another step on the road to recovery.
...
Job Growth Boosts Rents in Largest U.S. Rental Markets
Rents rose more than 10% year-over-year in five large rental markets – San Francisco, Sacramento, Oakland, Denver, and Miami. These five markets all had job growth ranging from solid to stellar.Overall, rents rose 6.1% nationally, with rents increasing more in markets with faster job growth.
emphasis added

Note: These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a seasonally adjusted basis.

by Calculated Risk on 8/07/2014 10:44:00 AM

From the MBA: Delinquency and Foreclosure Rates Decrease in Second Quarter

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 6.04 percent of all loans outstanding at the end of the second quarter of 2014. The delinquency rate decreased for the fifth consecutive quarter and reached the lowest level since the fourth quarter of 2007. The delinquency rate decreased seven basis points from the previous quarter, and 92 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 second quarter was 2.49 percent, down 16 basis points from the first quarter and 84 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 second quarter fell to 0.40 percent from 0.45 percent, a decrease of five basis points, and reached 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 4.80 percent, a decrease of 24 basis points from last quarter, and a decrease of 108 basis points from the second quarter of last year. Similar to the previous quarter, 75 percent of seriously delinquent loans were originated in 2007 and earlier. Loans with vintages started in 2011 and later only accounted for six percent of all seriously delinquent loans.

“Delinquency and foreclosure rates fell to their lowest levels in more than six years, and the rate of new foreclosure starts is at its lowest level since 2006,” said Mike Fratantoni, MBA’s Chief Economist. “Strong job growth and continued increases in home prices in most markets have been the main contributors to these steady improvements in mortgage performance.

“We have returned to more typical seasonal patterns with respect to mortgage delinquency, with 30-day and 60-day delinquency rates increasing from the first to the second quarter on an unadjusted basis. Adjusting for the seasonal pattern, we estimate that delinquencies were down for the quarter, and are down almost a full percentage point from last year.

“Nationally, the seriously delinquent rate fell by 24 basis points last quarter and has dropped 108 basis points over the past year. The loans that are seriously delinquent, either 90+ days late or in the foreclosure process, were primarily made prior to the downturn, with 75 percent of them originated in 2007 or earlier. Loans made in recent years continue to perform extremely well due to the improving market and tight credit conditions.
...
The declining trend in later stage delinquencies and foreclosure measures is clearly continuing at the national level,” added Joel Kan, MBA’s Director of Economic Forecasting. “Some states hardest hit by the crisis, for example California and Arizona, now have foreclosure inventory rates that are both back to pre-crisis levels and less than half the current national rate. On the other hand, despite declines last quarter, states with slower-moving judicial foreclosure regimes, like New Jersey, Florida and New York, have foreclosure inventory rates two to three times the national average. There were 18 states with a higher foreclosure inventory rate than the national average, and 15 of those were judicial states. Judicial states are also starting to see more foreclosure starts than non-judicial states, whereas there used to be no clear tendency for either foreclosure regime in the past quarters.
emphasis added

CR Notes: 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.

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.

This survey includes all mortgage loans (including terrible lending via Wall Street).  The total serious delinquency rate is 4.80% compared to less than 2.1% for Fannie and Freddie.

by Calculated Risk on 8/07/2014 08:37:00 AM

The DOL reports:

In the week ending August 2, the advance figure for seasonally adjusted initial claims was 289,000, a decrease of 14,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 302,000 to 303,000. The 4-week moving average was 293,500, a decrease of 4,000 from the previous week's revised average. This is the lowest level for this average since February 25, 2006 when it was 290,750. The previous week's average was revised up by 250 from 297,250 to 297,500.

There were no special factors impacting this week's initial claims.

The previous week was revised up to 303,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 293,500.

This was lower than the consensus forecast of 305,000. 

by Calculated Risk on 8/06/2014 07:21:00 PM

From Tim Duy at Economist's View: Fed Watch: Fed Hawks Squawk

How much leeway does Fed Chair Janet Yellen have in her campaign to hold interest rates low for a considerable period after asset purchases end later this year? If you listen to Fed hawks, you would believe that she is quickly running out of room. ...

... At the moment, we are focused on wages as the missing part of the higher rate equation. But that is too narrow of an analysis. Also on Yellen's side is low actual inflation and anchored inflation expectations. To be sure, the Fed will be under increasing pressure to begin normalizing policy if unemployment drops below 6%. At that point the Fed will be sufficiently close to their objectives that they will believe the odds of falling behind the curve will rise in the absence of movement toward policy normalization. But without a more pressing threat to inflation expectations from a combination of actual inflation in excess of the Fed's target and wage growth to support that inflation, Yellen has room to normalize policy at a gradual pace. For now, the data is still on her side and the hawks will remain frustrated, much as they have for the past several years.

CR Note: Duy says the "hawks will remain frustrated", but it is also important to note that they have also been wrong!

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 305 thousand from 302 thousand.

• Early, the Trulia Price Rent Monitors for July. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

• At 3:00 PM, Consumer Credit for June from the Federal Reserve. The consensus is for credit to increase $18.3 billion.

by Calculated Risk on 8/06/2014 05:31:00 PM

This might be a good time to review the seasonal pattern for employment.

Even in the best of years there are a significant number of jobs lost in the months of January and July. In 1994, when the economy added almost 3.9 million jobs, there were 2.25 million lost in January 1994, and almost 1 million payroll jobs lost in July of that year.

This year, in July 2014, 1.11 million total jobs were lost (not seasonally adjusted, NSA), however all of the decline in non-farm payrolls NSA was from the public sector (teacher layoffs). Usually those teachers return to the payrolls in September and early October. Since this happens every year, the BLS applies a seasonal adjustment before reporting the headline number.   

For the private sector, there are always a number of jobs lost in January (retailers and others cutting jobs) and in September (summer hires let go).

Click on graph for larger image.

This graph shows the seasonal pattern for the last decade for both total nonfarm jobs and private sector only payroll jobs. Notice the large spike down every January.

In July, the private sector added 127 thousand jobs (NSA).  This was the strongest July since 1999.

The key point is this is a series that NEEDS a seasonal adjustment!