by Calculated Risk on 11/20/2014 10:11:00 AM

The NAR reports: Existing-Home Sales Rise in October, First Year-Over-Year Increase since October 2013

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.5 percent to a seasonally adjusted annual rate of 5.26 million in October from an upwardly-revised 5.18 million in September. Sales are at their highest annual pace since September 2013 (also 5.26 million) and are now above year-over-year levels (2.5 percent from last October) for the first time since last October. ...

Total housing inventory at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – the lowest since March (also 5.1 months). Unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in October (5.26 million SAAR) were 1.5% higher than last month, and were 2.5% above the October 2013 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 2.22 million in October from 2.28 million in September.   Headline inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory increased 5.2% year-over-year in October compared to October 2013.  

Months of supply was at 5.1 months in October.

This was above expectations of sales of 5.15 million.  For existing home sales, the key number is inventory - and inventory is still low, but up year-over-year.    I'll have more later ...

by Calculated Risk on 11/20/2014 08:36:00 AM

From the Bureau of Labor Statistics (BLS): Consumer Price Index - October 2014

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.
...
The index for all items less food and energy increased 0.2 percent in October.
emphasis added

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

On weekly unemployment claims, the DOL reported:

In the week ending November 15, the advance figure for seasonally adjusted initial claims was 291,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 290,000 to 293,000. The 4-week moving average was 287,500, an increase of 1,750 from the previous week's revised average. The previous week's average was revised up by 750 from 285,000 to 285,750.

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

The previous week was up to 293,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 increased to 287,500.

This was higher than the consensus forecast, but the level suggests few layoffs.

by Calculated Risk on 11/19/2014 09:00:00 PM

Goldman Sachs has a model that divides the business cycle into four stages: early-cycle, mid-cycle, late-cycle and recession.  According to Goldman economist Kris Dawsey, the economy appears to be transitioning from early to mid-cycle (but not late-cycle or worse):

The likelihood of the economy showing late-cycle behavior or being in recession by the middle of 2015 is very low, according to the model. However, we expect a transition from early- to mid-cycle over the next half year. ... since early 2010 the model has characterized the economy as "early-cycle." This reflects the high degree of slack, a solid growth rate of activity, subdued inflationary pressure, and financial market outcomes consistent with an easy stance of monetary policy. ... Over the past year, the signal strength has declined considerably, showing that the choice between early- and mid-cycle has become more difficult. While mid-cycle behavior is qualitatively similar in many ways to early-cycle behavior, key differences include (1) smaller output and employment gaps, (2) slightly firmer inflation outcomes, (3) a trough in credit spreads and stock market volatility, and (4) a higher fed funds rate and related flattening in the yield curve led by the front end.
emphasis added

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 281 thousand from 290 thousand.

• Also at 8:30 AM, the Consumer Price Index for October. The consensus is for a 0.1% decrease in CPI in October, and for core CPI to increase 0.1%.

• At 10:00 AM, Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for sales of 5.15 million on seasonally adjusted annual rate (SAAR) basis. Sales in September were at a 5.17 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.31 million SAAR.

• Also at 10:00 AM, the Philly Fed manufacturing survey for November. The consensus is for a reading of 18.5, down from 20.7 last month (above zero indicates expansion).

by Calculated Risk on 11/19/2014 06:15:00 PM

From housing economist Tom Lawler:

Based on state and local realtor/MLS reports released through today, I have increased my estimate of October existing home sales as measured by the National Association of Realtors to a seasonally adjusted annual rate of 5.31 million (my estimate in last Friday’s report was 5.28 million). I also now “guesstimate” that the NAR’s existing home inventory number for October will be down 3.5% from September, and up 5.2% from last October. Finally, I project that the NAR’s median existing SF home sales price for October will be about 4% higher than last October.

CR Note: Existing home sales will be released tomorrow, and the consensus has moved up since Friday, and is now at 5.15 million.

Lawler also sent me the updated table below of short sales, foreclosures and cash buyers for selected cities in October.

On distressed: Total "distressed" share is down in these markets mostly due to a decline in short sales.

Short sales are down significantly in these areas.

Foreclosures are up in several of these 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
	Oct-14	Oct-13	Oct-14	Oct-13	Oct-14	Oct-13	Oct-14	Oct-13
Las Vegas	10.6%	21.0%	8.9%	6.0%	19.5%	27.0%	35.1%	44.9%
Reno**	6.0%	16.0%	4.0%	4.0%	10.0%	20.0%
Phoenix	3.7%	8.4%	6.2%	6.9%	9.9%	15.3%	27.7%	31.6%
Sacramento	6.1%	13.7%	6.3%	5.9%	12.4%	19.6%	20.6%	23.9%
Minneapolis	2.7%	5.1%	9.8%	16.4%	12.5%	21.5%
Mid-Atlantic	4.8%	8.2%	10.0%	7.9%	14.9%	16.1%	19.2%	19.9%
Orlando	5.2%	15.5%	26.7%	20.7%	31.8%	36.2%	41.8%	47.8%
California *	6.1%	10.3%	5.3%	6.7%	11.4%	17.0%
Bay Area CA*	3.5%	7.3%	2.7%	3.7%	6.2%	11.0%
So. California*	5.9%	10.8%	4.8%	6.3%	10.7%	17.1%
Miami MSA SF	8.3%	16.3%	19.5%	15.1%	27.8%	31.4%	39.3%	46.4%
Miami MSA C/TH	4.9%	11.3%	23.4%	18.3%	28.3%	29.6%	69.3%	73.1%
Tucson							26.8%	32.1%
Toledo							38.2%	37.1%
Wichita							28.9%	30.5%
Des Moines							18.8%	20.2%
Peoria							22.8%	21.1%
Georgia***							27.8%	N/A
Omaha							18.5%	20.0%
Pensacola							33.5%	33.7%
Knoxville							24.7%	26.5%
Memphis*			13.3%	19.8%
Birmingham AL			15.2%	21.0%
Springfield IL**			8.3%	15.3%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 11/19/2014 03:58:00 PM

A few key points:
• Housing permits in October were at the highest level since 2008. Last year, in 2013, there was a surge in multi-family permits in October - and that was followed by an increase for starts in November. It looks like that might happen again this year.

• Multi-family completions have increased sharply (2nd graph below). Completions are what matter for apartment market supply, and with more completions it appears that the apartment vacancy rate has reached bottom and even increased a little (but still low). More apartments on the market will probably mean higher vacancy rates and less upward pressure on rents.

• Single family starts are increasing, but are still extremely low (last graph below). As we've been discussing for several years, demographics have been very favorable for apartments (and the housing bust boosted apartments too).  However, looking forward, the demographics will become more favorable for home ownership. This is a positive for single family housing and for the overall economy.

On starts: There were 848 thousand total housing starts during the first ten months of 2014 (not seasonally adjusted, NSA), up 9.6% from the 774 thousand during the same period of 2013.  Single family starts are up 5%, and multifamily starts up 20%.  The key weakness has been in single family starts.

The following table shows the annual housing starts since 2005, and the percent change from the previous year (estimates for 2014). The housing recovery has slowed in 2014, especially for single family starts.  However I expect further growth in starts over the next several years.

Housing Starts (000s) and Annual Change
	Total	Total % Change	Single	Single % Change
2005	2,068.3	5.8%	1,715.8	6.5%
2006	1,800.9	-12.9%	1,465.4	-14.6%
2007	1,355.0	-24.8%	1,046.0	-28.6%
2008	905.5	-33.2%	622.0	-40.5%
2009	554.0	-38.8%	445.1	-28.4%
2010	586.9	5.9%	471.2	5.9%
2011	608.8	3.7%	430.6	-8.6%
2012	780.6	28.2%	535.3	24.3%
2013	924.9	18.5%	617.6	15.4%
20141	999.0	8.0%	645.0	4.5%
1Estimate for 2014

This graph shows the month to month comparison between 2013 (blue) and 2014 (red).  Starts in 2014 have been above the same month in 2013 for seven consecutive months.

Click on graph for larger image.

The year-over-year growth will slow in November and December because the comparisons will be more difficult.  However it does appear (based on permits) that starts will finish the year strong (like in 2013).

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).

Multifamily completions were up more than 50% year-over-year in October, but multi-family starts were down slightly year-over-year (starts are volatile month-to-month).

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Single family starts are moving up again on a rolling 12 months basis. 

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.