by Calculated Risk on 6/07/2015 09:25:00 PM

From Nick Timiraos at the WSJ: New Housing Headwind Looms as Fewer Renters Can Afford to Own

Demographics tell the story. Urban Institute researchers predict that more than 3 in 4 new households this decade, and 7 of 8 in the next, will be formed by minorities. These new households—nearly half of which will be Hispanic—have lower incomes, less wealth and lower homeownership rates than the U.S. average.

The upshot is that fewer than half of new households formed this decade and next will own homes. By contrast, almost three-quarters of new households in the 1990s became homeowners. The downtrend would push homeownership below 62% in 2020, and it would hold the rate near 61% in 2030, below the lowest level since records began in 1965.
...
Economists at Goldman Sachs say demographics could ultimately be a tailwind. They noted in an April report that even though Hispanics, for example, have lower homeownership rates than non-Hispanic whites, those rates have been rising for the past four decades. They see the homeownership rate stabilizing next year after it falls to 63.5%.

My sense is that the homeownership rate is near a bottom.

Monday:
• At 10:00 AM ET, The Fed will release the monthly Labor Market Conditions Index (LMCI).

Weekend:
• Schedule for Week of June 7, 2015

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are down 2 and DOW futures are down 15 (fair value).

Oil prices were down over the last week with WTI futures at $58.67 per barrel and Brent at $62.90 per barrel.  A year ago, WTI was at $103, and Brent was at $109 - so prices are down 40%+ year-over-year.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.76 per gallon (down about $0.90 per gallon from a year ago).

If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com

by Calculated Risk on 6/07/2015 12:33:00 PM

An update: Last year, I posted some demographic data for the U.S., see: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group, Decline in the Labor Force Participation Rate: Mostly Demographics and Long Term Trends, and The Future's so Bright ...

I pointed out that "even without the financial crisis we would have expected some slowdown in growth this decade (just based on demographics). The good news is that will change soon."

Changes in demographics are an important determinant of economic growth, and although most people focus on the aging of the "baby boomer" generation, the movement of younger cohorts into the prime working age is another key story in coming years. Here is a graph of the prime working age population (this is population, not the labor force) from 1948 through May 2015.

Click on graph for larger image.

There was a huge surge in the prime working age population in the '70s, '80s and '90s - and the prime age population has been mostly flat recently (even declined a little).

The prime working age labor force grew even quicker than the population in the '70s and '80s due to the increase in participation of women. In fact, the prime working age labor force was increasing 3%+ per year in the '80s!

So when we compare economic growth to the '70s, '80, or 90's we have to remember this difference in demographics (the '60s saw solid economic growth as near-prime age groups increased sharply).

See: Demographics and GDP: 2% is the new 4%

The prime working age population peaked in 2007, and appears to have bottomed at the end of 2012.  The good news is the prime working age group has started to grow again, and is now growing close to 0.4% per year - and this should boost economic activity.

by Calculated Risk on 6/06/2015 06:39:00 PM

This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.  These key markets hopefully show us changes in trends for sales and inventory.

For the sixth consecutive month, inventory was down year-over-year in Phoenix. This is a significant change from last year.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in May were up 11.4% year-over-year.

2) Cash Sales (frequently investors) were down to 24.0% of total sales.

3) Active inventory is now down 15.4% year-over-year.  

More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow.

Now, with falling inventory, prices might increase a little faster in 2015 (something to watch if inventory continues to decline).

May Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash Sales	Percent Cash	Inventory	YoY Change Inventory
May-08	5,6371	---	1,062	18.8%	54,1611	---
May-09	9,284	64.7%	3,592	38.7%	39,902	-26.3%
May-10	9,067	-2.3%	3,341	36.8%	41,326	3.6%
May-11	9,811	8.2%	4,523	46.1%	31,661	-23.4%
May-12	8,445	13.5%	3,907	46.3%	20,162	-36.3%
May-13	9,440	11.8%	3,669	38.9%	19,734	-2.1%
May-14	7,442	-21.2%	2,193	29.5%	29,091	47.4%
May-15	8,293	11.4%	1,988	24.0%	24,616	-15.4%
1 May 2008 does not include manufactured homes, ~100 more

by Calculated Risk on 6/06/2015 08:41:00 AM

The key economic report this week is May Retail sales on Thursday.

----- Monday, June 8th -----
At 10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).

----- Tuesday, June 9th -----
9:00 AM: NFIB Small Business Optimism Index for May.

10:00 AM: Job Openings and Labor Turnover Survey for April from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in March to 4.994 million from 5.144 million in February.

The number of job openings (yellow) were up 19% year-over-year, and Quits were up 14% year-over-year.

----- Wednesday, June 10th -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: The Q1 Quarterly Services Report from the Census Bureau.

2:00 PM ET: The Monthly Treasury Budget Statement for May.

----- Thursday, June 11th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 276 thousand from 275 thousand.

8:30 AM ET: Retail sales for May will be released.

This graph shows retail sales since 1992 through April 2015. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales were unchanged from March to April (seasonally adjusted), and sales were up 0.9% from April 2014.

The consensus is for retail sales to increase 1.3% in May, and to increase 0.8% ex-autos.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for April.  The consensus is for a 0.2% increase in inventories.

12:00 PM: Q1 Flow of Funds Accounts of the United States from the Federal Reserve.

----- Friday, June 12th -----
8:30 AM ET: The Producer Price Index for May from the BLS. The consensus is for a 0.4% increase in prices, and a 0.1% increase in core PPI.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for June). The consensus is for a reading of 91.2, up from 90.7 in May.

by Calculated Risk on 6/05/2015 09:09:00 PM

More good news ... the budget deficit in fiscal 2015 will probably be lower than the recent CBO March forecast.

From the Congressional Budget Office (CBO) today: Monthly Budget Review for May 2015

The federal government ran a budget deficit of $368 billion for the first eight months of fiscal year 2015, CBO estimates. That deficit was $68 billion smaller than the one recorded during the same period last year. Revenues and outlays were both higher than the amounts recorded during the same period in fiscal year 2014—by 9 percent and 4 percent, respectively. If not for shifts in the timing of certain payments (which otherwise would have fallen on a weekend), the deficit for the eight-month period would have been $33 billion less this year than it was in fiscal year 2014. ...

And for May 2015:

The federal government recorded a deficit of $85 billion in May 2015, CBO estimates—$45 billion less than the deficit in May 2014. If not for the effects of timing shifts that occurred in May 2014, the deficit in May 2015 would have been $9 billion (or 10 percent) smaller than it was in the same month last year.
emphasis added

The consensus was the deficit for May would be around $97 billion, and it appears the deficit for fiscal 2015 will be smaller than the CBO currently expects (less than 2.7% of GDP).