by Calculated Risk on 8/13/2014 01:33:00 PM

From DataQuick: Southland Home Sales Fall Yr/Yr Again; Prices Rise at Slower Pace

Southern California home sales fell to a three-year low for the month of July as supply continued to fall short of demand, some buyers struggled with higher prices, and investor activity fell. Cash deals declined to the lowest level in more than four years ...

A total of 20,369 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was down 1.4 percent from 20,654 sales in June, and down 12.4 percent from 23,253 sales in July 2013, according to Irvine-based CoreLogic DataQuick. ...

On average, sales have declined 6.3 percent between June and July since 1988, when CoreLogic DataQuick statistics begin. Southland sales have fallen on a year-over-year basis for 10 consecutive months. Sales during the month of July have ranged from a low of 16,225 in July 1995 to a high of 38,996 in July 2003. Last month’s sales were 19.4 percent below the July average of 25,269 sales.
...
Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 5.2 percent of the Southland resale market last month. That was down from a revised 5.3 percent the prior month and down from 7.7 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 5.9 percent of Southland resales last month. That was down from a revised 6.0 percent the prior month and down from 12.7 percent a year earlier.

Absentee buyers – mostly investors and some second-home purchasers – bought 23.6 percent of the Southland homes sold last month. That was the lowest share since December 2010, when 23.4 percent of homes sold to absentee buyers. Last month’s 23.6 percent absentee share was down from a revised 23.9 percent in June and down from 27.4 percent a year earlier. ...
emphasis added

Both distressed sales and investor buying is declining - and this has been dragging down overall sales.  Even though total sales are down 12.4% year-over-year, the percent of non-distressed sales was only down about 2% year-over-year. 

The NAR is scheduled to release existing home sales for July on Thursday, August 21st.

by Calculated Risk on 8/13/2014 11:44:00 AM

Here are two posts from August in 2011 and 2013.

First, from August 14, 2011: Event Driven Declines in Consumer Sentiment.

Consumer sentiment had plunged to the lowest level in 30 years. This (and other data) led many analysts to predict the US was headed into a recession. As an example, from the WSJ in September 2011: Recession Is a ‘Done Deal,’ Per ECRI

“We are going into a recession,” ECRI director Lakshman Achuthan told CNBC this morning. “Last week we announced to our clients we are slipping into a recession. This is the first time I’m saying it publicly.”

I disagreed.  In the above post I argued that the plunge in sentiment was due to the threat by Congress not to pay the bills (event driven), and that sentiment would bounce quickly.  I wrote:

My feeling is the debt ceiling decline - assuming the decline was due to the insanity in D.C. - is most similar to the 1987 stock market crash (that scared everyone, but had little impact on the economy) and to Hurricane Katrina (although Katrina led to higher oil prices and a direct impact on consumption in several gulf states).

If I'm correct, then sentiment should bounce back fairly quickly - but only to an already low level. And the impact on consumption should be minimal.

Second, from August 12, 2013: Comment: The Key Downside Economic Risk

At the beginning of every year I post Ten Economic Questions for the year. Since 2013 (like 2011) was an off-year for elections, I expected Congress to act up again and ranked fiscal policy as the #1 downside risk in 2013. I wrote in August 2013:

Unfortunately we live in the real world, and politics trump reality. ...

Still - even in the insane world of politics - the debt ceiling is a fake issue (the House will cave again - they have no choice). And hopefully we will not see a government shutdown, but I expect the negotiations will go down to the wire. My guess is we will see another "continuing resolution", but you never know with politics.

The good news is these showdowns mostly happen in odd years with the hope that the voters will forget the congressional shenanigans by the next election. So IF we can get through the fall, fiscal policy will probably not be a big downside risk in 2014. Unfortunately that is a big "if".

I was correct about the Debt Ceiling (this is a fake issue and should be eliminated), but I was too optimistic about the government shutdown. And I was correct fiscal policy is not a big downside risk this year, but this does remind us about 2015!

While most of the media is focused on the 2014 election "horse race", I'm concerned about the downside risks in 2015 from more "shenanigans".   Unfortunately voters have short memories.

by Calculated Risk on 8/13/2014 08:40:00 AM

On a monthly basis, retail sales were unchanged from June to July (seasonally adjusted), and sales were up 3.7% from July 2013. Sales in June were unrevised at a 0.2%. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for July, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $439.8 billion, virtually unchanged from the previous month, and 3.7 percent above July 2013. ... The May to June 2014 percent change was unrevised from +0.2 percent.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).


Retail sales ex-autos were up 0.1%. 

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 4.4% on a YoY basis (3.7% for all retail sales).

The increase in July was below consensus expectations of a 0.2% increase.

by Calculated Risk on 8/13/2014 07:02:00 AM

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

Mortgage applications decreased 2.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 8, 2014. ...

The Refinance Index decreased 4 percent from the previous week to the lowest level since May 2014. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier to the lowest level since February 2014. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) remained unchanged at 4.35 percent, with points unchanged at 0.22 (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 75% 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 10% from a year ago.

by Calculated Risk on 8/12/2014 08:01:00 PM

A must read piece from Tim Duy: Heading Into Jackson Hole

Bottom Line: Anything other than a dovish message coming from the Jackson Hole conference will be a surprise. Tight labor markets alone will not justify an aggressive pace of tightening. An aggressive pace requires that those tight labor markets manifest themselves into higher wage growth and higher inflation. Yellen seems content to normalize slowly until she sees the white in the eyes of inflation.

CR Note: Yellen will be patient.

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

• At 8:30 AM, Retail sales for July will be released. On a monthly basis, retail sales increased 0.2% from May to June (seasonally adjusted), and sales were up 4.3% from June 2013. The consensus is for retail sales to increase 0.2% in July, and to increase 0.4% ex-autos.

• At 10:00 AM, the Manufacturing and Trade: Inventories and Sales (business inventories) report for June. The consensus is for a 0.4% increase in inventories.