by Calculated Risk on 6/24/2015 04:08:00 PM

Here is an indicator that I follow on trucking, from the ATA: ATA Truck Tonnage Index Rose 1.1% in May

American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index increased 1.1% in May, following a revised loss of 1.4% during April. In May, the index equaled 132.1 (2000=100). The all-time high is 135.8, reached in January 2015.

Compared with May 2014, the SA index increased just 1.8%, which was well below the 2.7% gain in April and the smallest year-over-year gain since February 2013 (-4.3%). ...

“The good news is that truck tonnage increased in May,” said ATA Chief Economist Bob Costello. “But tonnage is certainly not strong at the moment as factory output is soft and there is an inventory reduction occurring throughout the supply chain.”

Costello noted that truck tonnage is off 2.7% from the high in January.

“I believe the inventory correction should end this summer and truck freight, helped by better personal consumption, will accelerate,” he said, “which is good because I think it is unlikely factory output will boost truck tonnage much until later this year or next year.”
emphasis added

Click on graph for larger image.

Here is a long term graph that shows ATA's For-Hire Truck Tonnage index.

The dashed line is the current level of the index.

The index is now up only 1.8% year-over-year.

by Calculated Risk on 6/24/2015 01:11:00 PM

According to Black Knight's First Look report for May, the percent of loans delinquent increased 4% in May compared to April, and declined 12% year-over-year.

The percent of loans in the foreclosure process declined 2% in May and were down 22% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.96% in May, up from 4.77% in April.

The percent of loans in the foreclosure process declined in May to 1.49%.  This was the lowest level of foreclosure inventory since January 2008.

The number of delinquent properties, but not in foreclosure, is down 326,000 properties year-over-year, and the number of properties in the foreclosure process is down 212,000 properties year-over-year.

Black Knight will release the complete mortgage monitor for May in early July.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	May 2015	Apr 2015	May 2014	May 2013
Delinquent	4.96%	4.70%	5.62%	6.08%
In Foreclosure	1.49%	1.55%	1.91%	3.05%
Number of properties:
Number of properties that are 30 or more, and less than 90 days past due, but not in foreclosure:	1,591,000	1,463,000	1,670,000	1,708,000
Number of properties that are 90 or more days delinquent, but not in foreclosure:	922,000	952,000	1,169,000	1,335,000
Number of properties in foreclosure pre-sale inventory:	754,000	764,000	966,000	1,525,000
Total Properties	3,268,000	3,179,000	3,805,000	4,569,000

by Calculated Risk on 6/24/2015 10:12:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture Billings Index Returns to Positive Territory

Led by growing demand for new schools, hospitals, cultural facilities and municipal buildings, the Architecture Billings Index (ABI) increased in May following its second monthly drop this year. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the May ABI score was 51.9, up from a mark of 48.8 in April. This score reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 61.5, up from a reading of 60.1 the previous month.

“As has been the case for the past several years, while the design and construction industry has been in a recovery phase, we continue to receive mixed signals on business conditions in the marketplace,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Generally, the business climate is favorable, but there are still construction sectors and regions of the country that are struggling, producing the occasional backslide in the midst of what seems to be growing momentum for the entire industry.”
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 51.9 in May, up from 48.8 in April. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.  The multi-family residential market was negative for the fourth consecutive month - and this might be indicating a slowdown for apartments - or at least less growth.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 10 of the last 12 months, suggesting an increase in CRE investment in 2015.

by Calculated Risk on 6/24/2015 08:35:00 AM

From the BEA: Gross Domestic Product: First Quarter 2015 (Third Estimate)

Real gross domestic product -- the value of the production of goods and services in the United States, adjusted for price changes -- decreased at an annual rate of 0.2 percent in the first quarter of 2015, according to the "third" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.2 percent.

The GDP estimate released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the decrease in real GDP was 0.7 percent. With the third estimate for the first quarter, exports decreased less than previously estimated, and personal consumption expenditures (PCE) and imports increased more ...
emphasis added

Here is a Comparison of Third and Second Estimates. PCE growth was revised up from 1.8% to 2.1%. Residential investment was revised up from 5.0% to 6.5%.

Q1 will probably be revised up again when the annual revision is released on July 30th.

by Calculated Risk on 6/24/2015 07:00:00 AM

From the MBA: Refi, Purchase Applications Both Up in Latest MBA Weekly Survey

Mortgage applications increased 1.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 19, 2015....

The Refinance Index increased 2 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index was unchanged compared with the previous week and was 18 percent higher than the same week one year ago.

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.19 percent from 4.22 percent, with points decreasing to 0.38 from 0.46 (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.

With higher rates, refinance activity has mostly declined recently.

2014 was the lowest year for refinance activity since year 2000, and refinance activity will probably stay low for the rest of 2015.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 18% higher than a year ago.

by Calculated Risk on 6/23/2015 08:54:00 PM

From Merrill Lynch:

We look for GDP growth to be revised higher to 0.4% qoq saar in 1Q, a notable improvement from the second release of -0.7%. This reflects stronger consumer spending given the upward revision to March core control retail sales and the QSS survey. We also look for somewhat stronger nonresidential structures investment, although it will continue to be a drag as a result of a drop in mining investment. Residential investment also looks likely to be revised higher as does government spending. Looking ahead, we expect growth to rebound to 3.4% in 2Q. ...

This will not be the final revision to 1Q GDP — it will likely be revised yet again with the annual GDP revision in July. A recent hot topic has been that 1Q real GDP has residual seasonality issues. The BEA plans to resolve some of these seasonality issues in the annual revision, thus we could see a sizeable upward revision to 1Q after this upcoming third release.

CR Note: The annual revision will be released on July 30th, along with the "advance" estimate for Q2 GDP.

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, Gross Domestic Product, 1st quarter 2015 (third estimate). The consensus is that real GDP decreased 0.2% annualized in Q1, revised up from the 0.7% decrease second estimate.

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

by Calculated Risk on 6/23/2015 05:40:00 PM

Note: This was delayed this month.

During the recession, I started following the Sacramento market to look for changes in the mix of houses sold (equity, REOs, and short sales). For some time, not much changed. But over the last 3 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 May, 9.8% of all resales were distressed sales. This was down from 11.9% last month, and down from 14.7% in May 2014. Since distressed sales happen year round, but conventional sales decline in December and January, the percent of distressed sales bumps up in the winter (seasonal).

The percentage of REOs was at 5.3% in May, and the percentage of short sales was 4.4%.

This is the lowest level of distressed sales since this data series started.

Here are the statistics.

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 (equity) sales that started in 2012 (blue) as the percentage of distressed sales declined sharply.

Active Listing Inventory for single family homes decreased 0.1% year-over-year (YoY) in May.  This was the first YoY decrease in inventory in Sacramento since April 2013.

Cash buyers accounted for 15.2% of all sales (frequently investors).

Total sales were up 4.1% from May 2014, and conventional equity sales were up 10.2% compared to the same month last year.

Summary: This data suggests a healing market with fewer distressed sales, more equity sales, and less investor buying.

by Calculated Risk on 6/23/2015 02:20:00 PM

Here is a relatively new indicator that I'm following that appears to be a leading indicator for industrial production.

From the American Chemistry Council: Leading Economic Indicator Heats Up

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), increased by 0.7 percent in June, followed by a similar gain in May, and an upwardly revised 0.5 percent gain in April. The pattern represents an acceleration of productivity not seen since the first quarter of 2011. Data is measured on a measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 3.7 percent over this time last year, also an acceleration of annual growth as compared to the first half of 2015. ...

Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

And this suggests some pickup in growth for industrial production.

by Calculated Risk on 6/23/2015 11:59:00 AM

The new home sales report for May was solid, with sales above expectations at 546 thousand on a seasonally adjusted annual rate basis (SAAR), and upward revisions to prior months.

Earlier: New Home Sales increased to 546,000 Annual Rate in May

The Census Bureau reported that new home sales this year, through May, were 233,000, not seasonally adjusted (NSA). That is up 24.0% from 188,000 during the same period of 2014 (NSA). That is a strong year-over-year gain for the first five months!

Sales were up 19.5% year-over-year in May.

Click on graph for larger image.

This graph shows new home sales for 2014 and 2015 by month (Seasonally Adjusted Annual Rate).

The year-over-year gain will probably be strong through July (the first seven months were especially weak in 2014), however I expect the year-over-year increases to slow later this year - but the overall year-over-year gain should be solid in 2015.

Also, as part of the new home sales report, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in May 2015 was $282,800; the average sales price was $337,000."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

The average price in May 2015 was $337,000 and the median price was $282,800.  Both are above the bubble high (this is due to both a change in mix and rising prices), but are below the recent peak. The recent decline in the median and average is probably because some builders have introduced new homes at lower price points.

The third graph shows the percent of new homes sold by price.

About 8% of homes sold were under $150K in May 2015.  This is down from 30% in 2002 - but up a little from earlier this year.  The under $150K new home is probably going away.

There has also been some pickup in homes sold in the $150K to $300K range.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next few years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through May 2015. This graph starts in 1994, but the relationship has been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.

I expect existing home sales to move sideways (distressed sales will continue to decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Another way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down, and this ratio will probably continue to trend down over the next several years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 6/23/2015 10:16:00 AM

The Census Bureau reports New Home Sales in May were at a seasonally adjusted annual rate (SAAR) of 546 thousand.

The previous three months were revised up by a total of 34 thousand (SA).

"Sales of new single-family houses in May 2015 were at a seasonally adjusted annual rate of 546,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 2.2 percent above the revised April rate of 534,000 and is 19.5 percent above the May 2014 estimate of 457,000."

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales since the bottom, new home sales are still close to the bottoms for previous recessions.

The second graph shows New Home Months of Supply.

The months of supply decreased in May to 4.5 months.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

"The seasonally adjusted estimate of new houses for sale at the end of May was 206,000. This represents a supply of 4.5 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In May 2015 (red column), 51 thousand new homes were sold (NSA). Last year 43 thousand homes were sold in May.  This is the highest for May since 2007.

The all time high for May was 120 thousand in 2005, and the all time low for May was 26 thousand in 2011.

This was above expectations of 525,000 sales in May, and new home sales are on pace for solid growth in 2015.  I'll have more later today.