Calculated Risk

Monday, April 25, 2011

Texas Manufacturing survey shows slower expansion in April

by Calculated Risk on 4/25/2011 03:21:00 PM

Earlier from the Dallas Fed: Texas Manufacturing Activity Increases but at a Slower Pace

Texas factory activity continued to expand in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, moved down from 24 to 8, suggesting slower growth in output.
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The new orders index was positive for the sixth consecutive month, although it decreased from 14 to 4 in April. ... The employment index edged up from 12 to 13, its highest reading this year. ... Hours worked were essentially flat in April after increasing for five consecutive months.

There are two more regional Fed surveys to be released this week (The Dallas survey is D-list data at best). These regional surveys do provide a hint about the ISM manufacturing index to be released next Monday, May 2nd, and I'll post a graph on Thursday after the other regional surveys are released.

Home Sales: Distressing Gap

by Calculated Risk on 4/25/2011 12:15:00 PM

Another update ... this graph shows existing home sales (left axis) and new home sales (right axis) through March. This graph starts in 1994, but the relationship has been fairly steady back to the '60s. Then along came the housing bubble and bust, and the "distressing gap" appeared (due mostly to distressed sales).

Click on graph for larger image in graph gallery.

The gap is due mostly to the flood of distressed sales. This has kept existing home sales elevated, and depressed new home sales since builders can't compete with the low prices of all the foreclosed properties.

Notes:
1) It is important to note that 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.

2) The National Association of Realtors (NAR) is working on a benchmark revision for existing home sales numbers. As I noted in January, this benchmarking is expected to result in significant downward revisions to sales estimates for the last few years - perhaps as much as 10% to 15% for 2009 and 2010. Even with these revisions, most of the "distressing gap" will remain.

New Home Sales in March at 300 Thousand SAAR, Record low for March

by Calculated Risk on 4/25/2011 10:00:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 300 thousand. This was up from a revised 270 thousand in February.

Click on graph for larger image in graph gallery.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Sales of new single-family houses in March 2011 were at a seasonally adjusted annual rate of 300,000 ... This is 11.1 percent (±21.7%)* above the revised February rate of 270,000, but is 21.9 percent (±10.3%) below the March 2010 estimate of 384,000.

And a long term graph for New Home Months of Supply:

New Home Months of Supply and Recessions

Months of supply decreased to 7.3 in March from 8.2 months in February. The all time record was 12.1 months of supply in January 2009. This is still higher than normal (less than 6 months supply is normal).

The seasonally adjusted estimate of new houses for sale at the end of March was 183,000. This represents a supply of 7.3 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.

This graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale fell to 73,000 units in March. The combined total of completed and under construction is at the lowest level since this series started.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In March 2011 (red column), 29 thousand new homes were sold (NSA). This is a new record low for the month of March.

The previous record low for March was 31 thousand in 2009. The high was 127 thousand in 2005.

Although slightly above the consensus forecast, this was a record low for March - and new home sales have averaged only 295 thousand SAAR over the last 11 months.

March Survey: Almost half of housing market is now distressed properties

by Calculated Risk on 4/25/2011 08:39:00 AM

From Campbell/Inside Mortgage Finance HousingPulse: HousingPulse Distressed Property Index Rises for Month; Homebuyer Traffic Flattens

The HousingPulse Distressed Property Index (DPI), a key indicator of the health of the U.S. housing market, rose to 48.6 percent in March – the second highest level seen in the past 12 months.
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The HousingPulse DTI indicated that nearly half of the housing market is now distressed properties. This trend is likely to continue as a backlog of foreclosures and mortgage defaults make their way through the housing pipeline.
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Survey respondents reported mixed opinions on traffic for the winter and spring housing market. “January, February and March sales were characterized by a wait and see attitude of buyers.
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[S]hort sales boomed in the month of March and the proportion of damaged REO fell. Short sales rose from 17.0% in February to a record-high 19.6% in March. Damaged REO fell from 14.9% in February to 12.0% in March.

This fits with other data showing a high level of distressed properties, and this suggests further declines in the repeat transaction house price indexes.

Sunday, April 24, 2011

Wells Fargo Forecast for New Home Sales

by Calculated Risk on 4/24/2011 10:59:00 PM

From Alan Zibel at the WSJ: Home Builders' Outlook Stays Fragile

Wells Fargo Securities projects only modest increases over the next two years, with 330,000 new-home sales likely this year, followed by 440,000 in 2012. It is likely to take another three years before new-home sales return to healthy annual sales of around 770,000, said Wells Fargo economist Anika Khan.

That is a little more optimistic than my outlook. The key will be how long it takes to absorb all the excess vacant housing units. The pickup in residential investment this year will be mostly from apartments and home improvement, but eventually we will see an increase in new home sales.

I haven't forecast new home sales for 2012 yet, but Khan's forecast of 440 thousand sales next year is still for one of the lowest years on record - and yet that would be a 33% increase in sales from her forecast for this year. If her forecast is close that would give a nice boost to employment and GDP.

But for the home builders right now, it is "wait until next year" once again.

Earlier:
• Schedule for Week of April 24th
• Summary for Week ending April 22nd
• FOMC Preview