by Calculated Risk on 8/20/2014 08:30:00 PM

From Andrew Ross at the San Francisco Chronicle: Household income hasn't shared in recovery

As of June, median annual household income was 4.8 percent below December 2007, when the recession began, dropping from $56,000 to $54,000. Going back to the good old days, it's down 5.9 percent from January 2000, according to the Sentier Research Group, which compiled the numbers from the latest Current Population Survey by the U.S. Census Bureau.

I think this is real household income (adjusted for inflation). Hopefully, as the unemployment rate continues to decline, the median real household income will start to increase.

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 305 thousand from 311 thousand.

• At 10:00 AM, Existing Home Sales for July from the National Association of Realtors (NAR). The consensus is for sales of 5.00 million on seasonally adjusted annual rate (SAAR) basis. Sales in June were at a 5.04 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.09 million SAAR. A key will be the reported year-over-year increase in inventory of homes for sale.

• Also at 10:00 AM, the Philly Fed manufacturing survey for August. The consensus is for a reading of 18.5, down from 23.9 last month (above zero indicates expansion).

by Calculated Risk on 8/20/2014 04:34:00 PM

Economist Tom Lawler sent me the updated table below of short sales, foreclosures and cash buyers for several selected cities in July.

Comments from CR: Tom Lawler has been sending me this table every month for several years. I think it is very useful for looking at the trend for distressed sales and cash buyers in these areas. I sincerely appreciate Tom sharing this data with us!

On distressed: Total "distressed" share is down in all of these markets, mostly because of a sharp decline in short sales.

Short sales are down in all of these areas.

Foreclosures are down in most of these areas too, although foreclosures are up a little in few areas like Nevada, Sacramento, Orlando, Miami and the Mid-Atlantic (areas with foreclosure delays related to a judicial foreclosure process or state law changes).

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	July-14	July-13	July-14	July-13	July-14	July-13	July-14	July-13
Las Vegas	11.5%	28.0%	10.1%	8.0%	21.6%	36.0%	35.6%	54.5%
Reno**	8.0%	21.0%	4.0%	7.0%	12.0%	28.0%
Phoenix	3.7%	11.5%	5.9%	9.4%	9.6%	20.8%	24.8%	35.8%
Sacramento	5.7%	17.9%	6.3%	5.1%	12.0%	23.0%	20.9%	25.5%
Minneapolis	3.0%	5.7%	9.5%	15.0%	12.5%	20.7%
Mid-Atlantic	4.3%	6.6%	7.7%	6.6%	12.1%	13.2%	17.1%	16.1%
Orlando	8.3%	17.9%	24.4%	17.5%	32.7%	35.4%	39.6%	47.8%
California *	6.6%	12.7%	5.6%	8.3%	12.2%	21.0%
Bay Area CA*	4.2%	8.5%	2.7%	4.6%	6.9%	13.1%	20.2%	23.5%
So. California*	5.9%	12.7%	5.2%	7.7%	11.1%	20.4%	24.5%	30.0%
Miami MSA SF	8.5%	17.8%	17.4%	12.9%	25.9%	30.7%	38.6%	43.2%
Miami MSA C/TH	5.1%	12.6%	21.7%	17.1%	26.8%	29.7%	68.1%	75.0%
Georgia***							24.1%	N/A
Toledo							32.9%	35.0%
Wichita							28.0%	24.1%
Des Moines							15.1%	15.1%
Peoria							18.4%	18.6%
Tucson							26.2%	29.1%
Omaha							17.0%	15.9%
Pensacola							32.9%	30.0%
Memphis*			13.4%	16.9%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 8/20/2014 02:11:00 PM

Note: Most participants want to see more data - and several are still concerned that inflation is too low.

From the Fed: Minutes of the Federal Open Market Committee, July 29-30, 2014. Excerpts:

With respect to monetary policy over the medium run, participants generally agreed that labor market conditions and inflation had moved closer to the Committee's longer-run objectives in recent months, and most anticipated that progress toward those goals would continue. Moreover, many participants noted that if convergence toward the Committee's objectives occurred more quickly than expected, it might become appropriate to begin removing monetary policy accommodation sooner than they currently anticipated. Indeed, some participants viewed the actual and expected progress toward the Committee's goals as sufficient to call for a relatively prompt move toward reducing policy accommodation to avoid overshooting the Committee's unemployment and inflation objectives over the medium term. These participants were increasingly uncomfortable with the Committee's forward guidance. In their view, the guidance suggested a later initial increase in the target federal funds rate as well as lower future levels of the funds rate than they judged likely to be appropriate. They suggested that the guidance should more clearly communicate how policy-setting would respond to the evolution of economic data. However, most participants indicated that any change in their expectations for the appropriate timing of the first increase in the federal funds rate would depend on further information on the trajectories of economic activity, the labor market, and inflation. In particular, although participants generally saw the drop in real GDP in the first quarter as transitory, some noted that it increased uncertainty about the outlook, and they were looking to additional data on production, spending, and labor market developments to shed light on the underlying pace of economic growth. Moreover, despite recent inflation developments, several participants continued to believe that inflation was likely to move back to the Committee's objective very slowly, thereby warranting a continuation of highly accommodative policy as long as projected inflation remained below 2 percent and longer-term inflation expectations were well anchored.
...
Members discussed their assessments of progress--both realized and expected--toward the Committee's objectives of maximum employment and 2 percent inflation and considered enhancements to the statement language that would more clearly communicate the Committee's view on such progress. Regarding the labor market, many members concluded that a range of indicators of labor market conditions--including the unemployment rate as well as a number of other measures of labor utilization--had improved more in recent months than they anticipated earlier. They judged it appropriate to replace the description of recent labor market conditions that mentioned solely the unemployment rate with a description of their assessment of the remaining underutilization of labor resources based on their evaluation of a range of labor market indicators. In their discussion, some members expressed reservations about describing the extent of underutilization in labor resources more broadly. In particular, they worried that the degree of labor market slack was difficult to characterize succinctly and that the statement language might prove difficult to adjust as labor market conditions continued to improve. Moreover, they were concerned that, despite the improvement in labor market conditions, the new language might be misinterpreted as indicating increased concern about underutilization of labor resources. At the conclusion of the discussion, the Committee agreed to state that labor market conditions had improved, with the unemployment rate declining further, while also stating that a range of labor market indicators suggested that there remained significant underutilization of labor resources. Many members noted, however, that the characterization of labor market underutilization might have to change before long, particularly if progress in the labor market continued to be faster than anticipated. Regarding inflation, members agreed to update the language in the statement to acknowledge that inflation had recently moved somewhat closer to the Committee's longer-run objective and to convey their judgment that the likelihood of inflation running persistently below 2 percent had diminished somewhat.
emphasis added

by Calculated Risk on 8/20/2014 09:59:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From AIA: Architecture Billings Index Reaches Highest Mark Since 2007

The last three months have shown steadily increasing demand for design services and the Architecture Billings Index (ABI) is now at its highest level since 2007. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the July ABI score was 55.8, up noticeably from a mark of 53.5 in June. This score reflects an increase in design activity (any score above 50 indicates an increase in billings). The new projects inquiry index was 66.0, following a very strong mark of 66.4 the previous month.

The AIA has added a new indicator measuring the trends in new design contracts at architecture firms that can provide a strong signal of the direction of future architecture billings. The score for design contracts in July was 54.9.

“Business conditions for the design and construction marketplace, and those industries associated with it, appear to be well-positioned for continued growth in the coming months,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “The key to a more widespread boost in design activity continues to be the institutional sector which is starting to exhibit signs of life after languishing for the better part of the last five-plus years.”

• Regional averages: Northeast (55.5), South (55.1), Midwest (54.1), West (53.5) [three month average]
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 55.8 in July, up from 53.5 in June. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  So the readings over the last year suggest an increase in CRE investment this year and in 2015.

by Calculated Risk on 8/20/2014 07:01:00 AM

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey

Mortgage applications increased 1.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 15, 2014. ...

The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index decreased 0.4 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.29 percent from 4.35 percent, with points increasing to 0.26 from 0.22 (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.

The refinance index is down 74% from the levels in May 2013.

As expected, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 11% from a year ago.