by Calculated Risk on 8/27/2014 07:44:00 PM

CR Note: Many analysts and reporters use Census data to estimate ongoing household formation. They are ignoring severe problems with the Census estimates ... from housing economist Tom Lawler:

For well over a decade I have been trying to get Census to explain the widely different estimates of households from different surveys. In a 2004 "summit" that I hosted at Fannie Mae, I asked Census officials "what household number from a time series perspective should analysts use as the best estimate from Census?" The answer I got a decade a go was, "that's a good question." Read the attached.

Household Estimates Conundrum: Effort to Develop More Consistent Household Estimates Across Surveys

And here is the conclusion section from the above.

We have an obligation to our data users to provide clear, unambiguous explanations and guidance about the estimates we provide on households (occupied housing units). In our role as the "leading source of quality data about the Nation’s people and economy," we ultimately should be able to:

1. Develop a common methodology that produces reasonably consistent estimates of households (and, therefore, vacant housing units) across our current surveys,

2. Develop a common methodology that may still produce noticeable differences but still be able to explain differences and recommend a preferred estimate, or

3. Be able to explain why we cannot develop a common methodology and be able to explain the differences and provide guidance about the agency’s preferred estimate of households (occupied housing units) for the United States.

It's been a long slog ...

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 300 thousand from 298 thousand.

• Also at 8:30 AM, Gross Domestic Product, 2nd quarter 2014 (second estimate). The consensus is that real GDP increased 4.0% annualized in Q2, unchanged from 4.0% in the advance estimate.

• At 10:00 AM, the Pending Home Sales Index for July. The consensus is for a 0.5% increase in the index.

• At 11:00 AM, the Kansas City Fed manufacturing survey for August. This is the last of the Fed regional surveys for August.

by Calculated Risk on 8/27/2014 04:27:00 PM

I use the weekly Freddie Mac Primary Mortgage Market Survey® (PMMS®) to track mortgage rates. The PMMS series started in 1971, so there is a fairly long historical series.

For daily rates, the Mortgage News Daily has a series that tracks the PMMS very well, and is usually updated daily around 4 PM ET. The MND data is based on actual lender rate sheets, and is mostly "the average no-point, no-origination rate for top-tier borrowers with flawless scenarios". (this tracks the Freddie Mac series).

MND reports that average 30 Year fixed mortgage rates declined today to 4.11% from 4.13% yesterday.

One year ago rates were at 4.61%, so rates are down 50 bps year-over-year.

I've mentioned before that mortgage refinancing tends to pickup when mortgage rates drop by about 50 bps from the recent levels.  However rates were only at or above 4.60% for a short period - and many homeowners refi'd when rates were below 4% in 2012 and 2013.  So I don't expect a "refi boom" right now.

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 8/27/2014 12:36:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate declined in July to 2.02% from 2.07% in June. Freddie's rate is down from 2.70% in July 2013, and this is the lowest level since January 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Note: Fannie Mae will report their Single-Family Serious Delinquency rate for July in a few days.

Click on graph for larger image

Although this indicates progress, the "normal" serious delinquency rate is under 1%. 

The serious delinquency rate has fallen 0.68 percentage points over the last year - and at that rate of improvement, the serious delinquency rate will not be below 1% until early 2016.

Note: Very few seriously delinquent loans cure with the owner making up back payments - most of the reduction in the serious delinquency rate is from foreclosures, short sales, and modifications. 

So even though distressed sales are declining, I expect an above normal level of Fannie and Freddie distressed sales for perhaps 2 more years (mostly in judicial foreclosure states).

by Calculated Risk on 8/27/2014 10:25:00 AM

The Congressional Budget Office (CBO) released new budget projections today An Update to the Budget and Economic Outlook: 2014 to 2024. The projected budget deficits have been reduced for most of the next ten years, although the projected deficit for 2014 has been revised up slightly (by $14 billion).

NOTE: In the previous update, the CBO revised down their projection of the deficit for fiscal 2014 from 3.7% to just under 2.9% of GDP.

From the CBO:

The federal budget deficit for fiscal year 2014 will amount to $506 billion, CBO estimates, roughly $170 billion lower than the shortfall recorded in 2013. At 2.9 percent of gross domestic product (GDP), this year's deficit will be much smaller than those of recent years (which reached almost 10 percent of GDP in 2009) and slightly below the average of federal deficits over the past 40 years.
...
CBO's current economic projections differ in some respects from the ones issued in February 2014. The agency has significantly lowered its projection of growth in real GDP for 2014, reflecting surprising economic weakness in the first half of the year. However, the level of real GDP over most of the coming decade is projected to be only modestly lower than estimated in February. In addition, CBO now anticipates lower interest rates throughout the projection period and a lower unemployment rate for the next six years.
emphasis added

The CBO projects the deficit will decline further in 2015, and will be at or below 3% of GDP through fiscal 2019.  Then the deficit will slowly increase.

Click on graph for larger image.

This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO.

The CBO revised down their deficit projections for fiscal years 2017 through 2024.

by Calculated Risk on 8/27/2014 07:01:00 AM

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

Mortgage applications increased 2.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 22, 2014. ...

The Refinance Index increased 3 percent from the previous week. The seasonally adjusted Purchase Index increased 3 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 4.28 percent from 4.29 percent, with points decreasing to 0.25 from 0.26 (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 73% 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.