by Calculated Risk on 6/24/2015 07:00:00 AM

From the MBA: Refi, Purchase Applications Both Up in Latest MBA Weekly Survey

Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 19, 2015....

The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index was unchanged compared with the previous week and was 18 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.19 percent from 4.22 percent, with points decreasing to 0.38 from 0.46 (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.

With higher rates, refinance activity has mostly declined recently.

2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 18% higher than a year ago.

by Calculated Risk on 6/23/2015 08:54:00 PM

From Merrill Lynch:

We look for GDP growth to be revised higher to 0.4% qoq saar in 1Q, a notable improvement from the second release of -0.7%. This reflects stronger consumer spending given the upward revision to March core control retail sales and the QSS survey. We also look for somewhat stronger nonresidential structures investment, although it will continue to be a drag as a result of a drop in mining investment. Residential investment also looks likely to be revised higher as does government spending. Looking ahead, we expect growth to rebound to 3.4% in 2Q. ...

This will not be the final revision to 1Q GDP — it will likely be revised yet again with the annual GDP revision in July. A recent hot topic has been that 1Q real GDP has residual seasonality issues. The BEA plans to resolve some of these seasonality issues in the annual revision, thus we could see a sizeable upward revision to 1Q after this upcoming third release.

CR Note: The annual revision will be released on July 30th, along with the "advance" estimate for Q2 GDP.

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, Gross Domestic Product, 1st quarter 2015 (third estimate). The consensus is that real GDP decreased 0.2% annualized in Q1, revised up from the 0.7% decrease second estimate.

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

by Calculated Risk on 6/23/2015 05:40:00 PM

Note: This was delayed this month.

During the recession, I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales). For some time, not much changed. But over the last 3 years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market and other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In May, 9.8% of all resales were distressed sales. This was down from 11.9% last month, and down from 14.7% in May 2014. Since distressed sales happen year round, but conventional sales decline in December and January, the percent of distressed sales bumps up in the winter (seasonal).

The percentage of REOs was at 5.3% in May, and the percentage of short sales was 4.4%.

This is the lowest level of distressed sales since this data series started.

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional (equity) sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Active Listing Inventory for single family homes decreased 0.1% year-over-year (YoY) in May.  This was the first YoY decrease in inventory in Sacramento since April 2013.

Cash buyers accounted for 15.2% of all sales (frequently investors).

Total sales were up 4.1% from May 2014, and conventional equity sales were up 10.2% compared to the same month last year.

Summary: This data suggests a healing market with fewer distressed sales, more equity sales, and less investor buying.

by Calculated Risk on 6/23/2015 02:20:00 PM

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

From the American Chemistry Council: Leading Economic Indicator Heats Up

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), increased by 0.7 percent in June, followed by a similar gain in May, and an upwardly revised 0.5 percent gain in April. The pattern represents an acceleration of productivity not seen since the first quarter of 2011. Data is measured on a measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 3.7 percent over this time last year, also an acceleration of annual growth as compared to the first half of 2015. ...

Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research.
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 some pickup in growth for industrial production.

by Calculated Risk on 6/23/2015 11:59:00 AM

The new home sales report for May was solid, with sales above expectations at 546 thousand on a seasonally adjusted annual rate basis (SAAR), and upward revisions to prior months.

Earlier: New Home Sales increased to 546,000 Annual Rate in May

The Census Bureau reported that new home sales this year, through May, were 233,000, not seasonally adjusted (NSA). That is up 24.0% from 188,000 during the same period of 2014 (NSA). That is a strong year-over-year gain for the first five months!

Sales were up 19.5% year-over-year in May.

Click on graph for larger image.

This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate).

The year-over-year gain will probably be strong through July (the first seven months were especially weak in 2014), however I expect the year-over-year increases to slow later this year - but the overall year-over-year gain should be solid in 2015.

Also, as part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in May 2015 was $282,800; the average sales price was $337,000."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

The average price in May 2015 was $337,000 and the median price was $282,800.  Both are above the bubble high (this is due to both a change in mix and rising prices), but are below the recent peak. The recent decline in the median and average is probably because some builders have introduced new homes at lower price points.

The third graph shows the percent of new homes sold by price.

About 8% of homes sold were under $150K in May 2015.  This is down from 30% in 2002 - but up a little from earlier this year.  The under $150K new home is probably going away.

There has also been some pickup in homes sold in the $150K to $300K range.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through May 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Another way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down, and this ratio will probably continue to trend down over the next several years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.