by Calculated Risk on 7/24/2015 12:19:00 PM

The new home sales report for June was well below expectations at 482 thousand on a seasonally adjusted annual rate basis (SAAR), and there were also downward revisions to prior months.  However sales are still up solidly for 2015 compared to 2014.

A key question is if there was some negative impact of higher mortgage rates on sales? - or was the decline in June mostly noise?   Changes in rates would show up in New Home sales before Existing Home sales (that were strong in June) because New Home sales are reported when the contract is signed, and Existing Home sales are reported when the transaction closes.   If there is an impact from higher rates, then the impact will show up in the Existing Home sales report for July or August.

Earlier: New Home Sales decreased to 482,000 Annual Rate in June.

The Census Bureau reported that new home sales this year, through June, were 274,000, not seasonally adjusted (NSA). That is up 21.2% from 226,000 sales during the same period of 2014 (NSA). That is a strong year-over-year gain for the first half of 2015!

Sales were up 18.1% year-over-year in June.

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.

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 several years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through June 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 mostly move sideways over the next few years (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.

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.

by Calculated Risk on 7/24/2015 10:16:00 AM

The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 482 thousand.

The previous three months were revised down by a total of 49 thousand (SA).

"Sales of new single-family houses in June 2015 were at a seasonally adjusted annual rate of 482,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 6.8 percent below the revised May rate of 517,000, but is 18.1 percent above the June 2014 estimate of 408,000."

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 since the bottom, new home sales are still close to the bottoms for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply increased in June to 5.4 months.

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 June was 215,000. This represents a supply of 5.4 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 June 2015 (red column), 45 thousand new homes were sold (NSA). Last year 38 thousand homes were sold in June.  This is the highest for June since 2008.

The all time high for June was 115 thousand in 2005, and the all time low for June was 28 thousand in both 2010 and 2011.

This was well below expectations of 550,000 sales in June, however new home sales are still on pace for solid growth in 2015.  I'll have more later today.

by Calculated Risk on 7/23/2015 08:05:00 PM

Friday:
• At 10:00 AM ET, 10:00 AM: New Home Sales for June from the Census Bureau. The consensus is for an increase in sales to 550 thousand Seasonally Adjusted Annual Rate (SAAR) in June from 546 thousand in May.

A few excerpts from an FOMC preview by Goldman Sachs economist Zach Pandl:

The July 28-29 FOMC meeting is shaping up to be the calm before the storm. Short-term interest rate markets imply a zero probability that the committee will raise policy rates next week, but show a high likelihood of at least one hike before the end of the year. Thus, although changes to the stance of policy look very unlikely, the upcoming statement will be closely watched for any clues on the precise timing of liftoff (we continue to see December as most likely). We will be focused on three main items:
...
• First, the description of economic conditions will likely acknowledge the decline in the unemployment rate. We expect the statement to drop its prior reference to stable oil prices, but to leave other comments about inflation unchanged.

• Second, we do not expect additional language intended to prepare for rate hikes in the statement. In 2004 the FOMC used the “measured” phrase for this purpose, but Fed Chair Yellen downplayed the need for new guidance at the June press conference. A change along these lines is a risk for next week, however.

• Third, we do not expect dissents, but see them as a risk from President Evans (dovish) and President Lacker (hawkish).

by Calculated Risk on 7/23/2015 05:37:00 PM

Excerpts from a research piece by Michelle Meyer at Merrill Lynch:

The moment of truth
• The annual revision to GDP growth on July 30th will adjust estimates of growth over the past few years. If growth is indeed revised higher it would help solve the puzzle of low productivity growth.

• This will also be the first release of the new GDP and GDI composite. This will show a stronger trend of growth given that GDI has outpaced GDP recently.

• Taking a step back and examining a range of indicators reveals an economy expanding at a mid-2% pace, largely consistent with the Fed’s forecasts.
...
On July 30th, along with the first release of 2Q GDP, the Bureau of Economic Analysis (BEA) will release the 2015 annual NIPA revision. We will be looking for the following:

1. Will GDP growth be revised higher over the past few years? If so, this would imply faster productivity growth, which has been puzzlingly slow.

2. How will the revision to seasonal factors adjust the “residual seasonality” issue to 1Q GDP growth over the years?

3. Will the new aggregated GDP and GDI figure take the spotlight away from GDP?

Although it is hard to say with any certainty, we believe GDP growth is likely to be revised up modestly. This will likely leave the Fed comfortable arguing that the economy is making progress closing the output gap, allowing a gradual hiking cycle to commence.

And on Q2:

The first estimate of 2Q GDP is likely to show growth of 3.0%, which would be a bounce from the contraction of 0.2% in 1Q. However, it is important to remember that the history will be revised along with this report.

by Calculated Risk on 7/23/2015 02:45:00 PM

From Black Knight: Black Knight Financial Services’ “First Look” at June Mortgage Data: Foreclosure Inventory at Lowest Level Since 2007, Still Three Times “Normal” Rate

According to Black Knight's First Look report for June, the percent of loans delinquent decreased 3% in June compared to May, and declined 15.5% year-over-year.

The percent of loans in the foreclosure process declined 2% in June and were down 23% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.82% in June, down from 4.96% in May.

The percent of loans in the foreclosure process declined in June to 1.46%.  This was the lowest level of foreclosure inventory since 2007.

The number of delinquent properties, but not in foreclosure, is down 439,000 properties year-over-year, and the number of properties in the foreclosure process is down 212,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for June in early August.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	June 2015	May 2015	June 2014	June 2013
Delinquent	4.82%	4.96%	5.70%	6.68%
In Foreclosure	1.46%	1.49%	1.88%	2.93%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,549,000	1,591,000	1,728000	1,983,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	895,000	922,000	1,155,000	1,345,000
Number of properties in foreclosure pre-sale inventory:	739,000	754,000	951,000	1,458,000
Total Properties	3,183,000	3,268,000	3,834,000	4,785,000