by Calculated Risk on 10/21/2014 08:42:00 PM

Here is a forecast for 2015 from the MBA: MBA Sees Originations Increasing Seven Percent in 2015

The Mortgage Bankers Association announced today that it expects to see $1.19 trillion in mortgage originations during 2015, a seven percent increase from 2014. While MBA anticipates purchase originations will increase 15 percent, it expects refinance originations to decrease three percent.

MBA’s forecast predicts purchase originations will increase to $731 billion in 2015, up from $635 billion in 2014. In contrast, refinances are expected to drop to $457 billion, from $471 billion, in 2014.

For 2016, MBA is forecasting purchase originations of $791 billion and refinance originations of $379 billion for a total of $1.17 trillion.

“We are projecting that home purchase originations will increase in 2015 as the US economy continues on its current path of stronger growth, job gains and declining unemployment. The job market has shown sustained improvement this year; with robust monthly increases in both payroll jobs and job openings,” said Michael Fratantoni, MBA’s Chief Economist and Senior Vice President for Research and Industry Technology. “We are forecasting that strong job growth, coupled with still low mortgage rates, should translate to an increase in home sales and purchase originations.
emphasis added

Wednesday:
• At 7:00 AM ET, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, the Consumer Price Index for September. The consensus is for no change in CPI in September and for core CPI to increase 0.1%.

NOTE: When CPI is released on Wednesday, the Cost-of-living adjustment for 2015 will be released. If CPI-W is unchanged in September, COLA will be around 1.7%.

• During the day, the AIA's Architecture Billings Index for September (a leading indicator for commercial real estate).

by Calculated Risk on 10/21/2014 05:42:00 PM

From DataQuick: Golden State Foreclosure Starts Continue to Decline

Lending institutions initiated formal foreclosure proceedings last quarter on the lowest number of California homes in more than eight years, the result of a recovering real estate market and the dwindling pool of toxic home loans made in 2006 and 2007, Irvine-based CoreLogic DataQuick reported.

A total of 16,833 Notices of Default (NoDs) were recorded at county recorders offices during the July-through-September period. That was down 3.9 percent from 17,524 for the prior quarter, and down 17.1 percent from 20,314 in third-quarter 2013, according to CoreLogic DataQuick data.

Last quarter's NoD tally was the lowest since fourth-quarter 2005, when 15,337 NoDs were recorded. NoDs peaked in first-quarter 2009 at 135,431, while the low was 12,417 NoDs in third-quarter 2004. The NoD statistics go back to 1992.
...
"This home repo pipeline isn't exactly drying up, but it sure is diminishing. Its negative effect on the overall market is only a fraction of what it was several years ago, and is really only still noticeable in some pockets of the hardest-hit markets of the Inland Empire and Central Valley," said John Karevoll, a CoreLogic DataQuick analyst.

To some extent the level of NoD filings in recent quarters probably reflects the rate at which servicers are able to process paperwork. The 20,314 NoDs filed in third-quarter 2013 were followed by 18,120 the following quarter and then 19,215 in 2014Q1; 17,524 in 2014Q2; and 16,833 last quarter.

Most of the loans going into default are still from the 2005-2007 period. Last quarter the median origination quarter for defaulted loans was third-quarter 2006. That has been the case for more than five years, indicating that weak underwriting standards peaked then.
emphasis added

Click on graph for larger image.

This graph shows the number of Notices of Default (NoD) filed in California each year.   2014 is in red (estimate based on Q1, Q2 and Q3).

Last year was the lowest year for foreclosure starts since 2005, and 2013 was also below the levels in 1997 through 2000 when prices were rising following the much smaller late '80s housing bubble / early '90s bust in California.

Overall foreclosure starts are close to a normal level in California (foreclosure starts were over 50,000 in 2004 and 2005 when prices were rising quickly).

Note: Foreclosures are still higher than normal in states with a judicial foreclosure process.

by Calculated Risk on 10/21/2014 03:48:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and possibly some hints about the trade report for September since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 0.9% compared to the rolling 12 months ending in August.   Outbound traffic was down 0.4% compared to 12 months ending in August.

Inbound traffic has been increasing, and outbound traffic has been mostly moving sideways.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

Imports were up 10.6% year-over-year in September, exports were down 5.6% year-over-year.

This might suggest retailers are expecting a happy holiday season.

by Calculated Risk on 10/21/2014 01:31:00 PM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were generally little changed in September. Thirty-one states had unemployment rate decreases from August, 8 states had increases, and 11 states and the District of Columbia had no change, the U.S. Bureau of Labor Statistics reported today.
...
Georgia had the highest unemployment rate among the states in September, 7.9 percent. North Dakota again had the lowest jobless rate, 2.8 percent.

Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement. 

The states are ranked by the highest current unemployment rate. Georgia had the highest unemployment rate in September at 7.9%.

The second graph shows the number of states with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 10 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 8% (light blue); Nine states are still at or above 7% (dark blue).

by Calculated Risk on 10/21/2014 11:02:00 AM

A few comments ...

• Once again housing economist Tom Lawler's forecast of 5.14 million SAAR was closer than the consensus (5.05 million) to the NAR reported sales (5.17 million). It is getting harder for Lawler to beat the "consensus" because it appears several analysts are waiting for Lawler's estimate before submitting their own!

• "The sky is falling! The sky is falling!" Maybe not ... Remember those analysts who incorrectly claimed that declining year-over-year existing home sales were a sign that the "housing recovery" was over? That was wrong, and I correctly pointed out: 1) the "housing recovery" is mostly new home sales and housing starts - not existing home sales, 2) declining overall existing home sales were a positive if the decline was related to fewer distressed sales.

• The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 6.0% year-over-year in September.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data.

The headline NAR inventory number is not seasonally adjusted, even though there is a clear seasonal pattern. Trulia chief economist Jed Kolko has sent me the seasonally adjusted inventory. NOTE: The NAR does provide a seasonally adjusted months-of-supply, although that is in the supplemental data.

Click on graph for larger image.

This shows that inventory bottomed in January 2013 (on a seasonally adjusted basis), and inventory is now up about 12.5% from the bottom. On a seasonally adjusted basis, inventory was up 1.4% in September compared to August.

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, many "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

And it appears investor buying is declining year-over-year. From the NAR:

All-cash sales were 24 percent of transactions in September, up slightly from August (23 percent) but down from 33 percent in September of last year. Individual investors, who account for many cash sales, purchased 14 percent of homes in September, up from 12 percent last month but below September 2013 (19 percent). Sixty-three percent of investors paid cash in September.

And another key point: The NAR reported total sales were down 1.7% from September 2013, but normal equity sales were probably up year-over-year, and distressed sales down sharply.  From the NAR (from a survey that is far from perfect):

Distressed homes – foreclosures and short sales – increased slightly in September to 10 percent from 8 percent in August, but are down from 14 percent a year ago. Seven percent of September sales were foreclosures and 3 percent were short sales.

Last year in September the NAR reported that 14% of sales were distressed sales.

A rough estimate: Sales in September 2013 were reported at 5.26 million SAAR with 14% distressed.  That gives 740 thousand distressed (annual rate), and 4.52 million equity / non-distressed.  In September 2014, sales were 5.17 million SAAR, with 10% distressed.  That gives 520 thousand distressed - a decline of about 30% from September 2013 - and 4.65 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up slightly. 

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Click on graph for larger image.

Sales NSA in September (red column) were at the highest level for September since 2006.

Overall this was a solid report.

Earlier:
• Existing Home Sales in September: 5.17 million SAAR, Inventory up 6.0% Year-over-year