by Calculated Risk on 2/23/2015 06:32:00 PM

A few excerpts from a preview of Yellen's Testimony by Goldman Sachs economists Kris Dawsey and Chris Mischaikow:

Fed Chair Yellen will be presenting her semi-annual monetary policy testimony—sometimes called the "Humphrey-Hawkins" testimony—on Tuesday and Wednesday of this week (February 24 and 25). We expect Yellen not to stray far from the message of the January FOMC statement and meeting minutes, and we do not think she will preempt the Committee by sending a strong signal on whether "patience" will be removed from the statement at the March meeting.

The testimony will probably not be a major market mover. Indeed, the average absolute yield change around the Fed Chair's semi-annual testimony has declined over time and is considerably lower than the average absolute change around post-FOMC press conferences. Nonetheless, to the extent there are risks to our "don't rock the boat" expectation, we think they are skewed toward a slightly more dovish tilt.
...
The Fed will also release its semi-annual Monetary Policy Report at 10:00AM on Tuesday February 24, which is a roughly fifty-page document that provides additional background, charts, etc. supporting the Chair's testimony. Typically, this document generates very little interest. However, the July statement that "valuation metrics in some sectors do appear substantially stretched—particularly those for smaller firms in the social media and biotechnology industries," received considerable attention.

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for December. Although this is the December report, it is really a 3 month average of October, November and December prices. The consensus is for a 4.7% year-over-year increase in the National Index for December. The Zillow forecast is for the National Index to increase 4.7% year-over-year in December, and for prices to increase 0.5% month-to-month seasonally adjusted.

• At 10:00 AM, Testimony, Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Senate Banking, Housing, and Urban Affairs Committee, Washington, D.C.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for February.

• Also at 10:00 AM, Conference Board's consumer confidence index for February. The consensus is for the index to decrease to 99.1 from 102.9.

by Calculated Risk on 2/23/2015 03:41:00 PM

Inventory is still very low (down 0.5% year-over-year in January). This will be important to watch over the next few months at the start of the Spring buying season.

Note: As usually happens, housing economist Tom Lawler's estimate was closer than the consensus to the NAR reported sales rate.

Also, the NAR reported total sales were up 3.2% from January 2014, however normal equity sales were up even more, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):

Distressed sales – foreclosures and short sales – were 11 percent of sales in January, unchanged from last month but down from 15 percent a year ago. Eight percent of January sales were foreclosures and 3 percent were short sales. 

Last year in December the NAR reported that 15% of sales were distressed sales.

A rough estimate: Sales in January 2014 were reported at 4.67 million SAAR with 15% distressed.  That gives 701 thousand distressed (annual rate), and 3.97 million equity / non-distressed.  In January 2015, sales were 4.82 million SAAR, with 11% distressed.  That gives 530 thousand distressed - a decline of about 24% from January 2014 - and 4.29 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 8%.

Important: If total existing sales decline a little, or move side-ways - due to fewer distressed sales- that is a positive sign for real estate.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Click on graph for larger image.

Sales NSA in January (red column) were slightly higher than last year (NSA), and below sales in January 2013.

Earlier:
• Existing Home Sales in January: 4.82 million SAAR, Inventory down slightly Year-over-year

by Calculated Risk on 2/23/2015 12:45:00 PM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: U.S. Home Prices Down 0.1 Percent for the Month; Up 4.5 Percent Year-Over-Year

Today, the Data and Analytics division of Black Knight Financial Services released its latest Home Price Index (HPI) report, based on December 2014 residential real estate transactions. The Black Knight HPI combines the company’s extensive property and loan-level databases to produce a repeat sales analysis of home prices as of their transaction dates every month for each of more than 18,500 U.S. ZIP codes. The Black Knight HPI represents the price of non-distressed sales by taking into account price discounts for REO and short sales.

The Black Knight HPI decreased 0.1% percent in December, and is off 10.2% from the peak in June 2006 (not adjusted for inflation).

The year-over-year increases had been getting steadily smaller since peaking in 2013 - as shown in the table below - but the YoY increase has been about the same for the last four months:

Month	YoY House Price Increase
Jan-13	6.7%
Feb-13	7.3%
Mar-13	7.6%
Apr-13	8.1%
May-13	7.9%
Jun-13	8.4%
Jul-13	8.7%
Aug-13	9.0%
Sep-13	9.0%
Oct-13	8.8%
Nov-13	8.5%
Dec-13	8.4%
Jan-14	8.0%
Feb-14	7.6%
Mar-14	7.0%
Apr-14	6.4%
May-14	5.9%
June-14	5.5%
July-14	5.1%
Aug-14	4.9%
Sep-14	4.6%
Oct-14	4.5%
Nov-14	4.5%
Dec-14	4.5%

The press release has data for the 20 largest states, and 40 MSAs.

Black Knight shows prices off 41.0% from the peak in Las Vegas, off 34.3% in Orlando, and 32.0% off from the peak in Riverside-San Bernardino, CA (Inland Empire). Prices are at new highs in Colorado and Texas (Denver, Austin, Dallas, Houston). Prices are also at new highs in Nashville, TN, and San Jose, CA.

Note: Case-Shiller for December will be released tomorrow.

by Calculated Risk on 2/23/2015 10:00:00 AM

The NAR reports: Existing-Home Sales Cool in January As Available Inventory Remains Subdued

Total existing-home sale1, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 4.9 percent to a seasonally adjusted annual rate of 4.82 million in January (lowest since last April at 4.75 million) from an upwardly-revised 5.07 million in December. Despite January’s decline, sales are higher by 3.2 percent than a year ago. ...

Total housing inventory at the end of January increased 0.5 percent to 1.87 million existing homes available for sale, but is 0.5 percent lower than a year ago (1.88 million). Unsold inventory is at a 4.7-month supply at the current sales pace – up from 4.4 months in December.

Click on graph for larger image.

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

Sales in January (4.82 million SAAR) were 4.9% lower than last month, and were 3.2% above the January 2014 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.87 million in January from 1.86 million in December.   Headline inventory is not seasonally adjusted, and inventory usually decreases to 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 decreased 0.5% year-over-year in January compared to January 2014.  

Months of supply was at 4.7 months in January.

This was below expectations of sales of 5.00 million.  For existing home sales, a key number is inventory - and inventory is still low.    I'll have more later ...

by Calculated Risk on 2/23/2015 08:36:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth picked up slightly in January

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) edged up to +0.13 in January from –0.07 in December. Three of the four broad categories of indicators that make up the index increased from December, and only one of the four categories made a negative contribution to the index in January.

The index’s three-month moving average, CFNAI-MA3, ticked down to +0.33 in January from +0.34 in December. January’s CFNAI-MA3 suggests that growth in national economic activity was above its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests modest inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was above the historical trend in January (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.