by Calculated Risk on 12/30/2014 08:36:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3 month average of August, September and October prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: S&P/Case-Shiller National Home Price Index Pace Eases While Eight Cities Show Faster Gains

Data released today for October 2014, shows that the pace of home prices across the country continues to decelerate although eight cities did see prices rise faster... Both the 10-City and 20-City Composites saw year-over-year declines in October compared to September. The 10-City Composite gained 4.4% year-over-year, down from 4.7% in September. The 20-City Composite gained 4.5% year-over-year, compared to 4.8% in September. The S&P/CaseShiller U.S. National Home Price Index, which covers all nine U.S. census divisions, recorded a 4.6% annual gain in October 2014 versus 4.8% in September.
...
The National and Composite Indices were both slightly negative in October. Both the 10 and 20-City Composites reported a slight downturn, -0.1%, while the National Index posted a -0.2% change for the month. San Francisco and Tampa led all cities in October with increases of 0.8%. Chicago and Cleveland offset those gains by reporting decreases of -1.0% and -0.7% respectively.

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is off 18.0% from the peak, and up 0.7% in October (SA). The Composite 10 is up 24.1% from the post bubble low set in Jan 2012 (SA).

The Composite 20 index is off 17.0% from the peak, and up 0.8% (SA) in October. The Composite 20 is up 25.0% from the post-bubble low set in Jan 2012 (SA).

The National index is off 9.8% from the peak, and up 0.7% (SA) in October.  The National index is up 21.8% from the post-bubble low set in Dec 2012 (SA).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 4.4% compared to October 2013.

The Composite 20 SA is up 4.5% year-over-year..

The National index SA is up 4.6% year-over-year.

Prices increased (SA) in all 20 of the 20 Case-Shiller cities in October seasonally adjusted.  (Prices increased in 8 of the 20 cities NSA)  Prices in Las Vegas are off 42.3% from the peak, and prices in Denver and Dallas are at new highs (SA).

This was lower than the consensus forecast for a 4.8% YoY increase for the National index, and suggests a further slowdown in price increases. I'll have more on house prices later.

by Calculated Risk on 12/30/2014 07:01:00 AM

According to Black Knight's First Look report for November, the percent of loans delinquent increased 12% in November compared to October, and declined 6% year-over-year.

The percent of loans in the foreclosure process declined further in November and were down 35% over the last year.  Foreclosure inventory was at the lowest level since January 2008.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 6.08% in November, up from 5.44% in October. Some of the increase was seasonal (the delinquency rate usually increases in November).  The normal rate for delinquencies is around 4.5% to 5%.

The percent of loans in the foreclosure process declined to 1.63% in November from 1.69% in October.

The number of delinquent properties, but not in foreclosure, is down 329,000 properties year-over-year, and the number of properties in the foreclosure process is down 427,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for November in early January.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Nov 2014	Oct 2014	Nov 2013	Nov 2012
Delinquent	6.08%	5.44%	6.45%	7.03%
In Foreclosure	1.63%	1.69%	2.50%	3.61%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,925,000	1,658,000	1,958,000	1,999,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	1,163,000	1,101,000	1,283,000	1,584,000
Number of properties in foreclosure pre-sale inventory:	829,000	858,000	1,256,000	1,767,000
Total Properties	3,917,000	3,617,000	4,497,000	5,350,000

by Calculated Risk on 12/29/2014 07:08:00 PM

Earlier I posted some questions for next year: Ten Economic Questions for 2015. I'll try to add some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2014.

6) Real Wage Growth: Last month I listed a few economic "words of the year" for the last decade. I finished with: "2015: Wages (Just being hopeful - maybe 2015 will be the year that real wages start to increase)". Will real wages increase in 2015?

Jared Bernstein wrote an excellent article today on the labor market at the NY Times The Upshot: Signs of a Tightening Labor Market, but Still Room for Improvement. He mentioned wages:

For all the actual tightening in the 2014 job market, what is perhaps the most important indicator from the perspective of working families — wage growth — has hardly budged. Though commentators made a big deal out of the bump in pay from the last jobs report, the yearly trend in nominal hourly wage growth remains at about 2 percent, where it has been since 2010.

Bernstein is referring to “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report, .

Click on graph for larger image.

The blue line shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  As Bernstein noted, nominal wage growth has been running close to 2% since 2010.

The red line is real wage growth (adjusted using headline CPI).  Real wages increased during the crisis because CPI declined sharply.   CPI has been running under 2%, so there has been some real wage growth - and some of the recent increase in real wages is due to falling oil prices (CPI declined in November).

There are two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. All three data series are different, and most of the focus recently has been the CES series (used in the graph above).


The second graph shows the year-over-year change using the quarterly wage data from the Employment Cost Index (data starts in 2001). Once again this shows nominal wages have increasing about 2% per year, and real wages have been mostly unchanged. In the future I'll post a graph including benefits (benefits generally have risen faster than wages).

For this post the key point is that nominal wages have been only increasing about 2% per year. As the labor market tightens, we should start seeing some wage pressure as companies have to compete more for employees. Whether real wages start to pickup in 2015 - or not until 2016 or later - is a key question. I expect to see some increase in both real and nominal wage increases this year. I doubt we will see a significant pickup, but maybe another 0.5 percentage points for both, year-over-year.

Here are the ten questions for 2015 and a few predictions:
• Question #2 for 2015: How many payroll jobs will be added in 2015?
• Question #3 for 2015: What will the unemployment rate be in December 2015?
• Question #4 for 2015: Will too much inflation be a concern in 2015?
• Question #5 for 2015: Will the Fed raise rates in 2015? If so, when?
• Question #6 for 2015: Will real wages increase in 2015?
• Question #7 for 2015: What about oil prices in 2015?
• Question #8 for 2015: How much will Residential Investment increase?
• Question #9 for 2015: What will happen with house prices in 2015?
• Question #10 for 2015: How much will housing inventory increase in 2015?

by Calculated Risk on 12/29/2014 01:49:00 PM

A few related articles on oil  ...

From Bloomberg: Oil Falls to 5-Year Low as Supply Glut Seen Lingering

Oil fell to the lowest level in more than five years amid speculation that a global supply glut that’s driven crude into a bear market will continue through the first half of 2015.
...
WTI for February delivery fell 96 cents, or 1.8 percent, to $53.77 a barrel at 12:25 p.m. on the New York Mercantile Exchange.

Currently WTI is at $53.21, and Brent futures are at $57.79.

From Bloomberg: Oil Rigs in U.S. Drop by 37 to Lowest Level Since April

Rigs targeting oil declined by 37 to 1,499 in the week ended Dec. 26, Baker Hughes Inc. (BHI) said on its website today. The number of oil rigs has slipped by 76 in three weeks. ... The number of rigs targeting U.S. oil is down from a record 1,609 following a $55-a-barrel drop in global prices since June, threatening to slow the shale-drilling boom that’s propelled domestic production to the highest in three decades.
...
While the U.S. rig count has dropped, domestic production continues to surge, with the yield from new wells in shale formations including North Dakota’s Bakken and Texas’s Eagle Ford projected to reach records next month, Energy Information Administration data show.

Although new exploration will slow sharply, I expect domestic producers to continue to produce at most existing wells at current prices.

And less exploration will lead to layoffs.  From the WSJ: Oil Jobs Squeezed as Prices Plummet

Tom Runiewicz, a U.S. industry economist at IHS Global Insight, forecasts companies providing support services to oil and gas companies could lose 40,000 jobs by the end of 2015, about 9% of the category’s total, if oil stays around $56 a barrel through the second quarter of next year. Equipment manufacturers could shed 5,000 to 6,000 jobs, or about 6% of total employment for such companies.

There will be winners and losers with the decline in oil prices, however, since the US is a large net importer of oil (despite the myth reported by some in the media), overall the decline in oil prices should be a positive for the economy.

by Calculated Risk on 12/29/2014 10:35:00 AM

From the Dallas Fed: Texas Manufacturing Activity Picks Up Pace

Texas factory activity increased again in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose strongly from 6 to 15.8, indicating output grew at a faster pace in December.

Other measures of current manufacturing activity reflected continued growth during the month. The capacity utilization index rose from 9.8 to 12.4, due to a higher share of respondents noting an increase in December than in November. The shipments index climbed to 19.6, its highest reading in five months. The new orders index moved down from 5.6 to 1.3, suggesting moderating demand growth, but more than a quarter of firms noted increases in new orders over November levels.

Perceptions of broader economic conditions remained positive this month. The general business activity index fell from 10.5 to 4.1. The company outlook index was almost unchanged at 8.4, with 21 percent of respondents noting an improved outlook.

Labor market indicators reflected unchanged workweeks but continued employment increases. The December employment index held steady at a solid reading of 9.2
emphasis added

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (dashed green, through December), and five Fed surveys are averaged (blue, through December) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

It seems likely the ISM index will be solid, but show slower expansion in December. The ISM Manufacturing Index for December will be released on Friday, January 2nd, and the consensus is for a decrease to 57.5 from 58.7 in November.