by Calculated Risk on 8/04/2015 06:59:00 PM

From Jon Hilsenrath at the WSJ: Atlanta Fed’s Lockhart: Fed Is ‘Close’ to Being Ready to Raise Short-Term Rates

“I think there is a high bar right now to not acting, speaking for myself,” Mr. Lockhart said ...

Wednesday:
• At 7:00 AM, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:15 AM, the ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in July, down from 238,000 in June.

• At 8:30 AM, Trade Balance report for June from the Census Bureau. The consensus is for the U.S. trade deficit to be at $43.0 billion in June from $41.9 billion in May.

• At 10:00 AM, the ISM non-Manufacturing Index for July. The consensus is for index to increase to 56.2 from 56.0 in June.

• Also at 10:00 AM, Speech by Fed Governor Jerome Powell, The Structure and Liquidity of Treasury Bond Markets, At the Brookings Institute Conference: Are There Structural Issues in the U.S. Bond Markets?, Washington, D.C.

by Calculated Risk on 8/04/2015 03:18:00 PM

From housing economist Tom Lawler:

Below is a table showing some selected operating statistics for nine large, publicly-traded home builders for the quarter ended June 30, 2015.

As the table indicates, reported net home orders for these nine home builders in the quarter ended June 30, 2015 were up 13.7% from the comparable quarter of 2014. There are a few things worth noting. First, while Standard Pacific’s reported net home orders for the latest quarter exclude orders associated with the acquisition of a small Austin builder last June, both Horton’s orders and Meritage’s orders include orders associated with acquisitions of builders subsequent to the beginning of the second quarter of 2014. My “best guess” is that net home orders for these nine builders last quarter excluding the impact of such acquisitions were up about 12.5% from the comparable quarter of 2014.

On July 24th Census, in its “New Residential Sales” report for June, estimated that new home sales ran at a seasonally adjusted annual rate of 482,000, well below the “consensus” forecast. In addition, Census revised downward its estimate for home sales for each of the previous three months. For the second quarter as a whole Census estimated that new home sales were up 19% (not seasonally adjusted) from the comparable quarter of 2014 – well above the YOY gain the nine large builders shown above.

Of course, there are several reasons why net home orders for these nine builders do not always track Census’ estimate of new home sales. First, Census treats sales cancellations different than do builders. Second, the geographic “footprint” of these nine builders does not match that of the US as a whole. Third, the market share of these builders can change significantly. And finally, there may be timing differences between when a builder “books” a sale and when a sale is recorded in Census’ Survey of Construction.

Nevertheless, reported home orders from publicly-treaded builders not only “confirm” that new home sales last quarter were below “consensus” forecasts, but also suggest that Census may revise downward its estimate for second-quarter new home sales in the July “New Residential Sales” report.

	Net Orders			Settlements			Average Closing  Price ($000s)
Qtr. Ended:	6/15	6/14	% Chg	6/15	6/14	% Chg	6/15	6/14	% Chg
D.R. Horton	10,398	8,591	21.0%	9,856	7,676	28.4%	290	272	6.5%
Pulte Group	5,118	4,778	7.1%	3,744	3,798	-1.4%	332	328	1.2%
NVR	3,796	3,415	11.2%	3,175	2,943	7.9%	384	368	4.4%
The Ryland Group	2,387	2,228	7.1%	1,814	1,700	6.7%	351	333	5.4%
Beazer Homes	1,524	1,290	18.1%	1,293	1,241	4.2%	410	372	10.2%
Standard Pacific	1,567	1,425	10.0%	1,305	1,236	5.6%	532	479	11.1%
Meritage Homes	1,986	1,647	20.6%	1,556	1,368	13.7%	380	368	3.3%
MDC Holdings	1,481	1,419	4.4%	1,126	1,158	-2.8%	410	372	10.2%
M/I Homes	1,100	1,016	8.3%	919	894	2.8%	340	306	11.1%
Total	29,357	25,809	13.7%	24,788	22,014	12.6%	$345	$329	4.7%

by Calculated Risk on 8/04/2015 12:05:00 PM

A few excerpts from a research note by Goldman Sachs economists David Mericle and Karen Reichgott: What's Keeping the Kids at Their Parents' Homes?

The share of 18-34 year-olds living with their parents rose about four percentage points (pp) during the recession and its aftermath, resulting in a few million extra "kids in the basement." This group accounts for the bulk of the recent shortfall in household formation and represents a potentially large pool of pent-up demand for homebuilding. While the share of young people living with their parents began to decline in 2014, the decline has stalled over the last six months ...

To what extent do current labor market conditions explain the elevated rate of young people living with their parents? ... We find that this current labor force status "composition effect" accounts for about 1.3pp, or roughly one-third of the "excess" kids living with their parents.
...
What accounts for the rest? Part of the explanation is likely that the legacy of the recession wears off only gradually ...

Three other factors might also have played a role. First, researchers at the New York Fed and the Fed Board have found evidence that rising student debt and poor credit scores have contributed to the elevated share of young people living with their parents. Second, the median age at first marriage has increased at a faster than usual rate since 2007 ... Third ... rent-to-income ratios are at historic highs, especially for young people. The future trajectory of these three factors is less clear, suggesting that the share of 18-34 year-olds living at home might not fully return to pre-recession rates.
...
What are the implications for the long-run homebuilding outlook? The pool of "excess" young people living at home is so large that even if only two-thirds ever move out and even if this process takes another decade, trend household formation would likely fall near the upper end of our 1.2-1.3mn forecast range. Combined with a 300k annual rate of demolitions, such a scenario would imply a trend demand for new housing units of about 1.6mn per year, well above the current sub-1.2mn run rate of housing starts. As a result, we continue to see plenty of upside for residential investment.

by Calculated Risk on 8/04/2015 09:11:00 AM

Notes: This CoreLogic House Price Index report is for June. The recent Case-Shiller index release was for May. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports National Home Prices Rose by 6.5 Percent Year Over Year in June 2015

CoreLogic® ... today released its June 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 6.5 percent in June 2015 compared with June 2014. This change represents 40 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 1.7 percent in June 2015 compared with May 2015.

Including distressed sales, 35 states and the District of Columbia were at or within 10 percent of their peak prices in June 2015. Fifteen states and the District of Columbia reached new price peaks—Alaska, Arkansas, Colorado, Hawaii, Iowa, Kentucky, Nebraska, New York, North Carolina, North Dakota, Oklahoma, South Dakota, Tennessee, Texas and Wyoming. The CoreLogic HPI begins in January 1976.

Excluding distressed sales, home prices increased by 6.4 percent in June 2015 compared with June 2014 and increased by 1.4 percent month over month compared with May 2015. ...
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was up 1.7% in June (NSA), and is up 6.5% over the last year.

This index is not seasonally adjusted, and this was a solid month-to-month increase.


The second graph is from CoreLogic. The year-over-year comparison has been positive for forty consecutive months.

The YoY increase had been moving sideways over most of the last year, but has picked up a little recently.

by Calculated Risk on 8/03/2015 05:42:00 PM

From the Federal Reserve: The July 2015 Senior Loan Officer Opinion Survey on Bank Lending Practices

Regarding loans to businesses, the July survey results indicated that, on balance, banks reported little change in their standards on commercial and industrial (C&I) loans in the second quarter of 2015. In addition, banks reported having eased some loan terms, such as spreads and covenants, especially for larger firms on net. Meanwhile, survey respondents also reported that standards on commercial real estate (CRE) loans remained unchanged on balance. On the demand side, modest to moderate net fractions of banks indicated having experienced stronger demand for C&I and CRE loans during the second quarter.

Regarding loans to households, banks reported having eased lending standards for a number of categories of residential mortgage loans over the past three months on net. Most banks reported no change in standards and terms on consumer loans. On the demand side, moderate to large net fractions of banks reported stronger demand across most categories of home-purchase loans. Similarly, respondents experienced stronger demand for auto and credit card loans on net.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

This graph shows the change in lending standards and for CRE (commercial real estate) loans.

Mostly standards were unchanged for various categories of CRE (right half of graph).

The second graph shows the change in demand for CRE loans.

Banks are seeing a pickup in demand for all categories of CRE - including multi-family.

This suggests that we will see further increases in commercial real estate development.

Also the banks are easing credit a little for residential mortgages  (see graph on page 3).