by Calculated Risk on 6/25/2015 08:46:00 AM

The BEA released the Personal Income and Outlays report for May:

Personal income increased $79.0 billion, or 0.5 percent ... in May, according to the Bureau of Economic Analysis. Personal consumption expenditures (PCE) increased $105.9 billion, or 0.9 percent.
...
Real PCE -- PCE adjusted to remove price changes -- increased 0.6 percent in May, compared with an increase of less than 0.1 percent in April. ... The price index for PCE increased 0.3 percent in May, compared with an increase of less than 0.1 percent in April. The PCE price index, excluding food and energy, increased 0.1 percent in May, the same increase as in April.

The May price index for PCE increased 0.2 percent from May a year ago. The May PCE price index, excluding food and energy, increased 1.2 percent from May a year ago.

The following graph shows real Personal Consumption Expenditures (PCE) through May 2015 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was higher than expected.  And the increase in PCE was above the 0.7% increase consensus.  A strong report.

On inflation: The PCE price index increased 0.2 percent year-over-year due to the sharp decline in oil prices. The core PCE price index (excluding food and energy) increased 1.2 percent year-over-year in May.

Using the two-month method to estimate Q2 PCE growth, PCE was increasing at a 3.1% annual rate in Q2 2015 (using the mid-month method, PCE was increasing 4.2%). This suggests a rebound in PCE in Q2, and decent Q2 GDP growth.

by Calculated Risk on 6/25/2015 08:33:00 AM

The DOL reported:

In the week ending June 20, the advance figure for seasonally adjusted initial claims was 271,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 267,000 to 268,000. The 4-week moving average was 273,750, a decrease of 3,250 from the previous week's revised average. The previous week's average was revised up by 250 from 276,750 to 277,000.

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

The previous week was revised up by 1,000.

The following graph shows the 4-week moving average of weekly claims since 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 273,750.

This was below the consensus forecast of 273,000, and the low level of the 4-week average suggests few layoffs.

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

Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 273 thousand from 267 thousand.

• At 8:30 AM, Personal Income and Outlays for May. The consensus is for a 0.4% increase in personal income, and for a 0.7% increase in personal spending. And for the Core PCE price index to increase 0.1%.

• At 11:00 AM, the Kansas City Fed manufacturing survey for June.

Economist Tom Lawler sent me an undated table below of short sales, foreclosures and cash buyers for a few selected cities in May.

On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales (Mid-Atlantic is up year-over-year because of an increase in foreclosures in Baltimore).

Short sales are down in all of these areas.

The All Cash Share (last two columns) is declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

As Lawler noted last month: The Baltimore Metro area is included in the overall Mid-Atlantic region (covered by MRIS). Baltimore is shown separately because a large portion of the YOY increase in the foreclosure share of home sales in the Mid-Atlantic region was attributable to the significant increase in foreclosure sales in the Baltimore Metro area.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	May-15	May-14	May-15	May-14	May-15	May-14	May-15	May-14
Las Vegas	7.3%	7.9%	8.0%	9.1%	15.3%	17.0%	21.9%	40.2%
Reno**	5.0%	11.0%	4.0%	6.0%	9.0%	17.0%
Phoenix	2.8%	3.9%	3.2%	6.7%	6.0%	10.7%	24.0%	29.5%
Sacramento	4.7%	7.0%	5.4%	8.3%	10.1%	15.3%	17.4%	20.5%
Minneapolis	2.4%	3.9%	6.6%	10.0%	9.0%	13.9%
Mid-Atlantic	3.4%	5.2%	10.4%	8.1%	13.8%	13.3%	16.2%	17.2%
Baltimore MSA****	3.6%	5.8%	16.3%	11.9%	19.8%	17.6%
Orlando	3.9%	9.2%	22.8%	24.7%	26.7%	34.0%	33.9%	43.8%
Florida SF	5.3%	9.6%	25.7%	24.6%	31.0%	34.2%	43.4%	48.9%
Florida C/TH	3.2%	7.6%	20.6%	19.7%	23.9%	27.3%	69.5%	72.1%
Miami MSA SF	6.2%	9.6%	16.1%	16.4%	22.3%	26.0%	34.9%	42.6%
Miami MSA C/TH	3.2%	5.9%	17.6%	17.9%	20.8%	23.7%	65.8%	70.1%
Tampa MSA SF	4.3%	7.1%	20.0%	22.1%	24.3%	29.2%	35.3%	40.6%
Tampa MSA C/TH	3.0%	4.9%	13.6%	18.6%	16.6%	23.5%	57.5%	62.7%
Northeast Florida					26.7%	36.8%
Chicago (city)					16.2%	21.6%
Hampton Roads					17.4%	21.3%
Spokane					12.8%	17.0%
Hampton Roads					17.4%	21.3%
Spokane					12.8%	17.0%
Richmond VA MSA			8.5%	13.9%			14.9%	19.4%
Memphis			14.3%	15.6%			28.3%	31.6%
Springfield IL**			5.4%	8.7%
Tucson							25.6%	31.3%
Toledo							26.1%	36.6%
Des Moines							14.0%	17.5%
Peoria							17.9%	19.6%
Georgia***							20.3%	26.0%
Omaha							15.9%	19.4%
Pensacola							31.3%	32.6%
Knoxville							20.5%	22.9%
*share of existing home sales, based on property records **Single Family Only ***GAMLS ****Baltimore is included in the Mid-Atlantic region, but is shown separately here

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.