by Calculated Risk on 8/05/2015 07:00:00 AM

From the MBA: Refinance, Purchase Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 31, 2015. ...

The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 23 percent higher than the same week one year ago.

“Despite recent concerns about the economy, both purchase and refinance applications increased strongly in response to lower interest rates last week,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “Refinance activity was the highest since May when rates were last at this level. The increase in purchase activity was also notable for this time of year, up 23 percent relative to a year ago.”

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.13 percent, its lowest level since May 2015, from 4.17 percent, with points decreasing to 0.34 from 0.36 (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.

Even with the increase in activity, refinance activity is very low.

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 23% higher than a year ago.

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.