by Calculated Risk on 9/18/2014 09:35:00 AM

The DOL reports:

In the week ending September 13, the advance figure for seasonally adjusted initial claims was 280,000, a decrease of 36,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 315,000 to 316,000. The 4-week moving average was 299,500, a decrease of 4,750 from the previous week's revised average. The previous week's average was revised up by 250 from 304,000 to 304,250.

There were no special factors impacting this week's initial claims.

The previous week was revised up to 316,000.

The following graph shows the 4-week moving average of weekly claims since January 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 299,500.

This was below the consensus forecast of 305,000 and in the normal range for an economic expansion.

by Calculated Risk on 9/18/2014 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in August were at a seasonally adjusted annual rate of 956,000. This is 14.4 percent below the revised July estimate of 1,117,000, but is 8.0 percent above the August 2013 rate of 885,000.

Single-family housing starts in August were at a rate of 643,000; this is 2.4 percent below the revised July figure of 659,000. The August rate for units in buildings with five units or more was 304,000.
emphasis added

Building Permits:
Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 998,000. This is 5.6 percent below the revised July rate of 1,057,000, but is 5.3 percent above the August 2013 estimate of 948,000.

Single-family authorizations in August were at a rate of 626,000; this is 0.8 percent below the revised July figure of 631,000. Authorizations of units in buildings with five units or more were at a rate of 343,000 in August.

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased  sharply in August (Multi-family is volatile month-to-month).

Single-family starts (blue) decreased slightly in August.

The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and that housing starts have been increasing after moving sideways for about two years and a half years.

This was well below expectations of 1.04 million starts in August.  Note: Starts for July were revised higher, but starts for June were revised lower.

This was a disappointing report - however most of the decline was due to the volatile multi-family sector.  I'll have more later ...

by Calculated Risk on 9/17/2014 08:55:00 PM

On Scotland, from the NY Times: Scottish Independence Vote Balances Politics and Economics

On Thursday, Scotland will vote on a referendum that could establish a Scottish state separate from Britain for the first time since 1707. If it passes, the Scottish and British economic and political landscape will change drastically.

Registered voters in Scotland can vote on the referendum at their neighborhood polling station from 7 a.m. to 10 p.m. Votes will be counted immediately after the polls close; results are expected to be announced early Friday morning.

Thursday:
• At 8:30 AM ET, Housing Starts for August. Total housing starts were at 1.093 million (SAAR) in July. Single family starts were at 656 thousand SAAR in July. The consensus is for total housing starts to decrease to 1.040 million (SAAR) in August.

• Also at 8:30 AM, initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 305 thousand from 315 thousand.

• At 8:45 AM, Speech by Fed Chair Janet Yellen, The Importance of Asset Building for Low and Middle Income Households, At the Corporation for Enterprise Development's 2014 Assets Learning Conference, Washington, D.C. (via prerecorded video)

• At 10:00 AM, 2014 Current Employment Statistics (CES) Preliminary Benchmark Revision. From the BLS:

"Each year, the Current Employment Statistics (CES) survey estimates are benchmarked to comprehensive counts of employment from the Quarterly Census of Employment and Wages (QCEW) for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. ... The final benchmark revision will be issued with the publication of the January 2015 Employment Situation news release in February."

• Also at 10:00 AM, the Philly Fed manufacturing survey for September. The consensus is for a reading of 22.0, down from 28.0 last month (above zero indicates expansion).

• At 12:00 PM, the Q2 Flow of Funds Accounts of the United States from the Federal Reserve.

by Calculated Risk on 9/17/2014 05:31:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales).  For a long time, not much changed. But over the last 2+ years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market and other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In August 2014, 11.7% of all resales were distressed sales. This was down from 12.3% last month, and down from 19.0% in August 2013. This is the post-bubble low.

The percentage of REOs was at 5.3%, and the percentage of short sales was 6.4%.

Here are the statistics for August.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Active Listing Inventory for single family homes increased 60.6% year-over-year in August. 

Cash buyers accounted for 20.2% of all sales, down from 25.4% in August 2013, and down from 20.9% last month (frequently investors).  This has been trending down, and it appears investors are becoming much less of a factor in Sacramento.

Total sales were down 13% from August 2013, but conventional equity sales were only down 5.1% compared to the same month last year.

Summary: Distressed sales down sharply (at post bubble low), cash buyers down significantly, and inventory up significantly.  So price increases should slow, and builders will slow too (with more inventory), and we might see lower land prices in some of these areas. 

As I've noted before, we are seeing a similar pattern in other distressed areas.

by Calculated Risk on 9/17/2014 02:16:00 PM

Statement here ($10 billion in additional tapering as expected).  QE3 expected to end in October.

Here are the Policy Normalization Principles and Plans

As far as the "Appropriate timing of policy firming",  participant views were mostly unchanged (14 participants expect the first rate hike in 2015, and 2 in 2016 - so one participant moved from 2016 to 2015).

The FOMC projections for inflation are still on the low side through 2016.

Yellen press conference here.

On the projections, GDP for 2014 was revised down slightly, the unemployment rate was revised down again, and inflation projections were mostly unchanged.  Note: These projections were submitted before the CPI report this morning.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2014	2015	2016	2017
Sept 2014 Meeting Projections	2.0 to 2.2	2.6 to 3.0	2.6 to 2.9	2.3 to 2.5
June 2014 Meeting Projections	2.1 to 2.3	3.0 to 3.2	2.5 to 3.0	n.a.

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 6.1% in August, so the unemployment rate projection for Q4 2014 will probably be lowered slightly. 

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2014	2015	2016	2017
Sept 2014 Meeting Projections	5.9 to 6.0	5.4 to 5.6	5.1 to 5.4	4.9 to 5.3
June 2014 Meeting Projections	6.0 to 6.1	5.4 to 5.7	5.1 to 5.5	n.a.

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of July, PCE inflation was up 1.6% from July 2013, and core inflation was up 1.5%. The FOMC expects inflation to increase in 2015, but remain below their 2% target (Note: the FOMC target is symmetrical around 2%). 

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2014	2015	2016	2017
Sept 2014 Meeting Projections	1.5 to 1.7	1.6 to 1.9	1.7 to 2.0	1.9 to 2.0
June 2014 Meeting Projections	1.5 to 1.7	1.5 to 2.0	1.6 to 2.0	n.a.

Here are the FOMC's recent core inflation projections:

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2014	2015	2016	2017
Sept 2014 Meeting Projections	1.5 to 1.6	1.6 to 1.9	1.8 to 2.0	1.9 to 2.0
June 2014 Meeting Projections	1.5 to 1.6	1.6 to 2.0	1.7 to 2.0	n.a.