by Calculated Risk on 9/24/2014 10:00:00 AM

The Census Bureau reports New Home Sales in August were at a seasonally adjusted annual rate (SAAR) of 504 thousand.

July sales were revised up from 412 thousand to 427 thousand, and June sales were revised down from 422 thousand to 419 thousand.

"Sales of new single-family houses in August 2014 were at a seasonally adjusted annual rate of 504,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 18.0 percent above the revised July rate of 427,000 and is 33.0 percent above the August 2013 estimate of 379,000."

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the previous two years, new home sales are still close to the bottom for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply decreased in August to 4.8 months from 5.6 months in July.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of August was 203,000. This represents a supply of 4.8 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In August 2014 (red column), 41 thousand new homes were sold (NSA). Last year 31 thousand homes were also sold in August.  This was the best August since 2007.

The high for August was 110 thousand in 2005, and the low for August was 23 thousand in 2010.

This was well above expectations of 430,000 sales in August, and sales were up 33.0% year-over-year.

I'll have more later today.

by Calculated Risk on 9/24/2014 07:01:00 AM

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

Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending September 19, 2014. ...

The Refinance Index decreased 7 percent from the previous week. The seasonally adjusted Purchase Index decreased 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) increased to 4.39 percent, the highest rate since May 2014, from 4.36 percent, with points increasing to 0.35 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 76% 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 16% from a year ago.

by Calculated Risk on 9/23/2014 07:44:00 PM

From Matthew Klein at FT Alphaville: Fix housing finance, fix the economy?

Oscar Jorda, Moritz Schularick, and Alan Taylor have just come out with a paper on the increasingly important role that real estate, particularly residential real estate, has come to play in the financial systems of rich countries.

The trio previously collaborated on a comprehensive study of every rich-world business cycle since 1870, which found that the rate of private credit growth during an economic expansion helped predict the likelihood of financial crisis and directly corresponded to the severity of the subsequent downturn even in cases when there was no financial crisis ...

The new paper covers a slightly longer period and somewhat larger set of countries, but the biggest improvement is its distinction of different types of credit and different categories of borrowers. Their basic finding is that it was mortgage lending rather than lending to businesses or consumer credit that can explain the enormous increase in total bank credit (a decent proxy for overall financialisation) over the past 35 years ...

In 2005, when I started this blog, I argued that housing was 1) in a bubble, and 2) was the key to the business cycle (so the bursting bubble would lead to a recession). Professor Ed Leamer argued in 2007 that "Housing Is the Business Cycle"!   The good news is this suggests the recovery should continue.

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

• At 10:00 AM, New Home Sales for August from the Census Bureau. The consensus is for an increase in sales to 430 thousand Seasonally Adjusted Annual Rate (SAAR) in August from 412 thousand in July.

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

by Calculated Risk on 9/23/2014 04:30:00 PM

Here is a minor indicator that I follow, from ATA: ATA Truck Tonnage Index Increased 1.6% in August to New Record High

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.6% in August, following a gain of 1.5% the previous month. In August, the index equaled 132.6 (2000=100) versus 130.5 in July. August’s index is the highest on record, surpassing November 2013 (131.0).

Compared with August 2013, the SA index increased 4.5%, up from July’s 3.7% year-over-year gain. The latest year-over-year increase was the largest this year. Year-to-date, compared with the same period last year, tonnage is up 3.1%. ...

“After a strong July, factory production and housing starts fell in August on a month-to-month basis,” said ATA Chief Economist Bob Costello. “Truck tonnage actually did the opposite. Not only did it increase, it accelerated.”

Costello stated that tonnage is up 3.1% over the last two months alone and has surged 6.8% since hitting a recent low in January.

“I’m optimistic about the second half of the year for the economy, which means truck tonnage should do well too,” he said.
emphasis added

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is now up 4.5% year-over-year.

by Calculated Risk on 9/23/2014 12:49:00 PM

Here is a new indicator that I'm following that appears to be a leading indicator for industrial production.

From the American Chemistry Council: Pace of Growth Slows for Leading Economic Indicator for Second Consecutive Month

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), continued to see an easing of growth this month, with a 0.1 percent gain over August as measured on a three-month moving average (3MMA). Growth for the third quarter stands at an average monthly gain of 0.2 percent compared to the strong 0.5 percent monthly average during the first half of the year. Despite the softening pace, the September CAB marked a string of consecutive gains going back to July 2012. Though the pace of growth has slowed, current gains have the CAB up a healthy 3.9 percent over this time last year, and the barometer remains at its highest level since January 2008. ...

Though the production indicator was flat in September, construction-related coatings, pigments and other performance chemistries remained strong, despite last week’s weak housing report. Chemical equities were up sharply this month, continuing to outpace the broader market. New orders and inventories improved in September but at a slower pace than earlier months.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

And this suggests continued growth.