by Calculated Risk on 11/20/2014 01:43:00 PM

• Once again housing economist Tom Lawler's forecast of 5.31 million SAAR was closer than the consensus (5.15 million) to the NAR reported sales (5.26 million).

• The most important number in the NAR report each month is inventory.   This morning the NAR reported that inventory was up 5.2% year-over-year in October.   It is important to note that the NAR inventory data is "noisy" and difficult to forecast based on other data.  However this increase in inventory has slowed price increases.

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 11.7% from the bottom. On a seasonally adjusted basis, inventory was up 0.1% in October compared to September.

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 another key point: The NAR reported total sales were up 2.5% from October 2013, however normal equity sales were even more, 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 October the NAR reported that 14% of sales were distressed sales.

A rough estimate: Sales in October 2013 were reported at 5.13 million SAAR with 14% distressed.  That gives 718 thousand distressed (annual rate), and 4.41 million equity / non-distressed.  In October 2014, sales were 5.26 million SAAR, with 10% distressed.  That gives 526 thousand distressed - a decline of about 27% from October 2013 - and 4.73 million equity.  Although this survey isn't perfect, this suggests distressed sales were down sharply - and normal sales up around 7%.. 

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

Click on graph for larger image.

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

This was another solid report.

Earlier:
• Existing Home Sales in October: 5.26 million SAAR, Inventory up 5.2% Year-over-year

by Calculated Risk on 11/20/2014 11:57:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.6% annualized rate) in October. The 16% trimmed-mean Consumer Price Index rose 0.1% (1.8% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers did not change (0.0% annualized rate) in October. The CPI less food and energy rose 0.2% (2.5% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for October here. Motor fuel declined at a 31% annualized rate in October!

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.3%, the trimmed-mean CPI rose 1.9%, and the CPI less food and energy rose 1.8%. Core PCE is for September and increased just 1.5% year-over-year.

On a monthly basis, median CPI was at 2.6% annualized, trimmed-mean CPI was at 1.8% annualized, and core CPI increased 2.5% annualized.

On a year-over-year basis these measures suggest inflation remains at or below the Fed's target of 2%.

by Calculated Risk on 11/20/2014 10:11:00 AM

The NAR reports: Existing-Home Sales Rise in October, First Year-Over-Year Increase since October 2013

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.5 percent to a seasonally adjusted annual rate of 5.26 million in October from an upwardly-revised 5.18 million in September. Sales are at their highest annual pace since September 2013 (also 5.26 million) and are now above year-over-year levels (2.5 percent from last October) for the first time since last October. ...

Total housing inventory at the end of October fell 2.6 percent to 2.22 million existing homes available for sale, which represents a 5.1-month supply at the current sales pace – the lowest since March (also 5.1 months). Unsold inventory is now 5.2 percent higher than a year ago, when there were 2.11 million existing homes available for sale.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in October (5.26 million SAAR) were 1.5% higher than last month, and were 2.5% above the October 2013 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 2.22 million in October from 2.28 million in September.   Headline inventory is not seasonally adjusted, and inventory usually increases from the seasonal lows in December and January, and peaks in mid-to-late summer.

The third graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory increased 5.2% year-over-year in October compared to October 2013.  

Months of supply was at 5.1 months in October.

This was above expectations of sales of 5.15 million.  For existing home sales, the key number is inventory - and inventory is still low, but up year-over-year.    I'll have more later ...

by Calculated Risk on 11/20/2014 08:36:00 AM

From the Bureau of Labor Statistics (BLS): Consumer Price Index - October 2014

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.7 percent before seasonal adjustment.
...
The index for all items less food and energy increased 0.2 percent in October.
emphasis added

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

On weekly unemployment claims, the DOL reported:

In the week ending November 15, the advance figure for seasonally adjusted initial claims was 291,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 290,000 to 293,000. The 4-week moving average was 287,500, an increase of 1,750 from the previous week's revised average. The previous week's average was revised up by 750 from 285,000 to 285,750.

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

The previous week was up to 293,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 increased to 287,500.

This was higher than the consensus forecast, but the level suggests few layoffs.

by Calculated Risk on 11/19/2014 09:00:00 PM

Goldman Sachs has a model that divides the business cycle into four stages: early-cycle, mid-cycle, late-cycle and recession.  According to Goldman economist Kris Dawsey, the economy appears to be transitioning from early to mid-cycle (but not late-cycle or worse):

The likelihood of the economy showing late-cycle behavior or being in recession by the middle of 2015 is very low, according to the model. However, we expect a transition from early- to mid-cycle over the next half year. ... since early 2010 the model has characterized the economy as "early-cycle." This reflects the high degree of slack, a solid growth rate of activity, subdued inflationary pressure, and financial market outcomes consistent with an easy stance of monetary policy. ... Over the past year, the signal strength has declined considerably, showing that the choice between early- and mid-cycle has become more difficult. While mid-cycle behavior is qualitatively similar in many ways to early-cycle behavior, key differences include (1) smaller output and employment gaps, (2) slightly firmer inflation outcomes, (3) a trough in credit spreads and stock market volatility, and (4) a higher fed funds rate and related flattening in the yield curve led by the front end.
emphasis added

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 281 thousand from 290 thousand.

• Also at 8:30 AM, the Consumer Price Index for October. The consensus is for a 0.1% decrease in CPI in October, and for core CPI to increase 0.1%.

• At 10:00 AM, Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for sales of 5.15 million on seasonally adjusted annual rate (SAAR) basis. Sales in September were at a 5.17 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 5.31 million SAAR.

• Also at 10:00 AM, the Philly Fed manufacturing survey for November. The consensus is for a reading of 18.5, down from 20.7 last month (above zero indicates expansion).