RSS Feed by Calculated Risk on 8/05/2015 04:10:00 PM
Wednesday, August 05, 2015
Phoenix Real Estate in July: Sales Up 17%, Inventory DOWN 15% Year-over-year
This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying. These key markets hopefully show us changes in trends for sales and inventory.
For the eight consecutive month, inventory was down year-over-year in Phoenix. This is a significant change from last year.
The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):
1) Overall sales in July were up 16.6% year-over-year.
2) Cash Sales (frequently investors) were down to 21.9% of total sales.
3) Active inventory is now down 15.3% year-over-year.
More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014. And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.
Now, with falling inventory, prices might increase a little faster in 2015 (something to watch if inventory continues to decline). Prices are already up 2.1% through May (increasing faster than in 2014).
| July Residential Sales and Inventory, Greater Phoenix Area, ARMLS | ||||||
|---|---|---|---|---|---|---|
| Sales | YoY Change Sales | Cash Sales | Percent Cash | Active Inventory | YoY Change Inventory | |
| Jul-08 | 5,9741 | --- | --- | --- | 54,5272 | --- |
| Jul-09 | 9,095 | 52.2% | 3,269 | 35.9% | 38,024 | ---2 |
| Jul-10 | 7,101 | -21.9% | 2,901 | 40.9% | 42,887 | 12.8% |
| Jul-11 | 8,397 | 18.3% | 3,779 | 45.0% | 27,663 | -35.5% |
| Jul-12 | 7,152 | -14.8% | 3,214 | 44.9% | 20,384 | -26.3% |
| Jul-13 | 8,214 | 14.8% | 2,944 | 35.8% | 20,049 | -1.6% |
| Jul-14 | 6,790 | -17.3% | 1,681 | 24.8% | 27,081 | 35.1% |
| Jul-15 | 7,915 | 16.6% | 1,731 | 21.9% | 22,940 | -15.3% |
| 1 July 2008 does not include manufactured homes, ~100 more 2 July 2008 Inventory includes pending | ||||||
Lawler: Updated Table of Distressed Sales and Cash buyers for Selected Cities in June
by Calculated Risk on 8/05/2015 01:45:00 PM
Economist Tom Lawler sent me an updated table below of short sales, foreclosures and cash buyers for selected cities in June.
On distressed: Total "distressed" share is down in most of these markets mostly due to a decline in short sales (Baltimore is up because of an increase in foreclosures).
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 earlier: The Baltimore Metro area is included in the overall Mid-Atlantic region (covered by MRIS). Baltimore is also 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 | |||||
|---|---|---|---|---|---|---|---|---|
| Jun- 2015 | Jun- 2014 | Jun- 2015 | Jun- 2014 | Jun- 2015 | Jun- 2014 | Jun- 2015 | Jun- 2014 | |
| Las Vegas | 6.7% | 10.8% | 7.6% | 10.1% | 14.3% | 20.9% | 28.4% | 34.7% |
| Reno** | 5.0% | 10.0% | 3.0% | 7.0% | 8.0% | 17.0% | ||
| Phoenix | 2.8% | 3.8% | 3.6% | 6.2% | 6.4% | 10.0% | 23.0% | 26.6% |
| Sacramento | 5.8% | 7.0% | 4.6% | 6.5% | 10.4% | 13.6% | 17.8% | 19.8% |
| Minneapolis | 2.0% | 3.0% | 5.6% | 9.7% | 7.6% | 12.7% | ||
| Mid-Atlantic | 3.1% | 4.8% | 8.7% | 7.4% | 11.7% | 12.2% | 15.2% | 16.5% |
| Baltimore MSA**** | 3.1% | 4.3% | 14.3% | 10.7% | 17.4% | 15.0% | 20.7% | 19.8% |
| Orlando | 3.7% | 7.8% | 24.9% | 26.5% | 28.6% | 34.3% | 35.7% | 40.5% |
| Tampa MSA SF | 3.7% | 6.4% | 17.4% | 21.3% | 21.1% | 27.6% | 33.1% | 36.3% |
| Tampa MSA C/TH | 2.5% | 4.2% | 12.1% | 17.0% | 14.6% | 21.2% | 57.1% | 60.4% |
| Miami MSA SF | 5.8% | 8.7% | 17.1% | 17.6% | 22.9% | 26.3% | 34.9% | 41.9% |
| Miami MSA C/TH | 2.9% | 5.3% | 19.2% | 19.6% | 22.2% | 24.8% | 63.1% | 68.9% |
| Florida SF | 3.4% | 5.9% | 16.5% | 20.3% | 20.0% | 26.2% | 33.4% | 39.3% |
| Florida C/TH | 2.4% | 4.4% | 14.6% | 17.5% | 17.1% | 21.9% | 60.9% | 65.8% |
| Bay Area CA* | 2.1% | 3.0% | 1.9% | 2.8% | 4.0% | 5.8% | 20.0% | 21.6% |
| So. California* | 3.1% | 4.6% | 3.8% | 4.7% | 6.9% | 9.3% | 22.3% | 25.9% |
| Chicago (city) | 12.4% | 18.7% | ||||||
| Hampton Roads | 16.6% | 20.1% | ||||||
| Northeast Florida | 25.6% | 32.4% | ||||||
| Spokane | 10.7% | 14.1% | ||||||
| Tucson | 25.1% | 26.1% | ||||||
| Toledo | 27.0% | 28.4% | ||||||
| Wichita | 21.9% | 22.6% | ||||||
| Des Moines | 14.4% | 14.6% | ||||||
| Peoria | 16.1% | 21.3% | ||||||
| Georgia*** | 20.3% | 24.6% | ||||||
| Omaha | 14.6% | 16.3% | ||||||
| Pensacola | 31.6% | 30.5% | ||||||
| Knoxville | 18.9% | 22.9% | ||||||
| Richmond VA MSA | 7.1% | 9.7% | 13.8% | 16.1% | ||||
| Memphis | 11.4% | 12.4% | ||||||
| Springfield IL** | 5.1% | 8.4% | ||||||
| *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 | ||||||||
ISM Non-Manufacturing Index increased to 60.3% in July
by Calculated Risk on 8/05/2015 10:17:00 AM
The July ISM Non-manufacturing index was at 60.3%, up from 56.0% in June. The employment index increased in July to 59.6%,up from 52.7% in June. Note: Above 50 indicates expansion, below 50 contraction.
From the Institute for Supply Management: July 2015 Non-Manufacturing ISM Report On Business®
Economic activity in the non-manufacturing sector grew in July for the 66th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 60.3 percent in July, 4.3 percentage points higher than the June reading of 56 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 64.9 percent, which is 3.4 percentage points higher than the June reading of 61.5 percent, reflecting growth for the 72nd consecutive month at a faster rate. The New Orders Index registered 63.8 percent, 5.5 percentage points higher than the reading of 58.3 percent registered in June. The Employment Index increased 6.9 percentage points to 59.6 percent from the June reading of 52.7 percent and indicates growth for the 17th consecutive month. The Prices Index increased 0.7 percentage point from the June reading of 53 percent to 53.7 percent, indicating prices increased in July for the fifth consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in July. The majority of the respondents continue to have a positive outlook on business conditions and the overall economy. This is reflected directly by a number of new highs for some of the indexes." "
emphasis added
Click on graph for larger image.This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.
This was well above the consensus forecast of 56.2% and suggests much faster expansion in July than in June. Very strong.
Trade Deficit increased in June to $43.8 Billion
by Calculated Risk on 8/05/2015 08:39:00 AM
The Department of Commerce reported:
The U.S. Census Bureau and the U.S. Bureau of Economic Analysis, through the Department of Commerce, announced today that the goods and services deficit was $43.8 billion in June, up $2.9 billion from $40.9 billion in May, revised. June exports were $188.6 billion, $0.1 billion less than May exports. June imports were $232.4 billion, $2.8 billion more than May imports.The trade deficit was close to the consensus forecast of $43.0 billion.
The first graph shows the monthly U.S. exports and imports in dollars through June 2015.
Click on graph for larger image.Imports increased and exports were mostly unchanged in June.
Exports are 14% above the pre-recession peak and down 4% compared to June 2014; imports are at the pre-recession peak, and down 2% compared to June 2014.
The second graph shows the U.S. trade deficit, with and without petroleum.
The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products (wild swings earlier this year were due to West Coast port slowdown).Oil imports averaged $53.76 in June, up from $50.76 in May, and down from $96.41 in June 2014. The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.
The trade deficit with China increased to $31.5 billion in June, from $30.1 billion in June 2014. The deficit with China is a large portion of the overall deficit.
ADP: Private Employment increased 185,000 in July
by Calculated Risk on 8/05/2015 08:19:00 AM
Private sector employment increased by 185,000 jobs from June to July according to the June [July] ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.This was below the consensus forecast for 210,000 private sector jobs added in the ADP report.
...
Goods-producing employment rose by 8,000 jobs in July, after adding 13,000 in June. The construction industry added 15,000 jobs in July, down from 17,000 last month. Meanwhile, manufacturing added 2,000 jobs in July, after gaining 9,000 in June.
Service-providing employment rose by 178,000 jobs in July, down from 216,000 in June. month. The 19,000 new jobs added in financial activities was an increase from last month’s 12,000. ...
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth is strong, but it has moderated since the beginning of the year. Layoffs in the energy industry and weaker job gains in manufacturing are behind the slowdown. Nonetheless, even at this slower pace of growth, the labor market is fast approaching full employment.”
The BLS report for July will be released Friday, and the consensus is for 212,000 non-farm payroll jobs added in July.
MBA: Mortgage Applications Increase in Latest Weekly Survey, Purchase Index up 23% YoY
by Calculated Risk on 8/05/2015 07:00:00 AM
From the MBA: Refinance, Purchase Mortgage Applications Increase in Latest MBA Weekly Survey
Mortgage applications increased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 31, 2015. ...
The Refinance Index increased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier. The unadjusted Purchase Index increased 3 percent compared with the previous week and was 23 percent higher than the same week one year ago.
“Despite recent concerns about the economy, both purchase and refinance applications increased strongly in response to lower interest rates last week,” said Lynn Fisher, MBA’s Vice President of Research and Economics. “Refinance activity was the highest since May when rates were last at this level. The increase in purchase activity was also notable for this time of year, up 23 percent relative to a year ago.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.13 percent, its lowest level since May 2015, from 4.17 percent, with points decreasing to 0.34 from 0.36 (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.
Even with the increase in activity, refinance activity is very low.
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 23% higher than a year ago.
Tuesday, August 04, 2015
Wednesday: Trade Deficit, ADP Employment, ISM non-Mfg Survey
by Calculated Risk on 8/04/2015 06:59:00 PM
From Jon Hilsenrath at the WSJ: Atlanta Fed’s Lockhart: Fed Is ‘Close’ to Being Ready to Raise Short-Term Rates
“I think there is a high bar right now to not acting, speaking for myself,” Mr. Lockhart said ...Wednesday:
• At 7:00 AM, the Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
• At 8:15 AM, the ADP Employment Report for July. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in July, down from 238,000 in June.
• At 8:30 AM, Trade Balance report for June from the Census Bureau. The consensus is for the U.S. trade deficit to be at $43.0 billion in June from $41.9 billion in May.
• At 10:00 AM, the ISM non-Manufacturing Index for July. The consensus is for index to increase to 56.2 from 56.0 in June.
• Also at 10:00 AM, Speech by Fed Governor Jerome Powell, The Structure and Liquidity of Treasury Bond Markets, At the Brookings Institute Conference: Are There Structural Issues in the U.S. Bond Markets?, Washington, D.C.
Lawler: Large Home Builder Results, Q2/2015
by Calculated Risk on 8/04/2015 03:18:00 PM
From housing economist Tom Lawler:
Below is a table showing some selected operating statistics for nine large, publicly-traded home builders for the quarter ended June 30, 2015.
As the table indicates, reported net home orders for these nine home builders in the quarter ended June 30, 2015 were up 13.7% from the comparable quarter of 2014. There are a few things worth noting. First, while Standard Pacific’s reported net home orders for the latest quarter exclude orders associated with the acquisition of a small Austin builder last June, both Horton’s orders and Meritage’s orders include orders associated with acquisitions of builders subsequent to the beginning of the second quarter of 2014. My “best guess” is that net home orders for these nine builders last quarter excluding the impact of such acquisitions were up about 12.5% from the comparable quarter of 2014.
On July 24th Census, in its “New Residential Sales” report for June, estimated that new home sales ran at a seasonally adjusted annual rate of 482,000, well below the “consensus” forecast. In addition, Census revised downward its estimate for home sales for each of the previous three months. For the second quarter as a whole Census estimated that new home sales were up 19% (not seasonally adjusted) from the comparable quarter of 2014 – well above the YOY gain the nine large builders shown above.
Of course, there are several reasons why net home orders for these nine builders do not always track Census’ estimate of new home sales. First, Census treats sales cancellations different than do builders. Second, the geographic “footprint” of these nine builders does not match that of the US as a whole. Third, the market share of these builders can change significantly. And finally, there may be timing differences between when a builder “books” a sale and when a sale is recorded in Census’ Survey of Construction.
Nevertheless, reported home orders from publicly-treaded builders not only “confirm” that new home sales last quarter were below “consensus” forecasts, but also suggest that Census may revise downward its estimate for second-quarter new home sales in the July “New Residential Sales” report.
| Net Orders | Settlements | Average Closing Price ($000s) | |||||||
|---|---|---|---|---|---|---|---|---|---|
| Qtr. Ended: | 6/15 | 6/14 | % Chg | 6/15 | 6/14 | % Chg | 6/15 | 6/14 | % Chg |
| D.R. Horton | 10,398 | 8,591 | 21.0% | 9,856 | 7,676 | 28.4% | 290 | 272 | 6.5% |
| Pulte Group | 5,118 | 4,778 | 7.1% | 3,744 | 3,798 | -1.4% | 332 | 328 | 1.2% |
| NVR | 3,796 | 3,415 | 11.2% | 3,175 | 2,943 | 7.9% | 384 | 368 | 4.4% |
| The Ryland Group | 2,387 | 2,228 | 7.1% | 1,814 | 1,700 | 6.7% | 351 | 333 | 5.4% |
| Beazer Homes | 1,524 | 1,290 | 18.1% | 1,293 | 1,241 | 4.2% | 410 | 372 | 10.2% |
| Standard Pacific | 1,567 | 1,425 | 10.0% | 1,305 | 1,236 | 5.6% | 532 | 479 | 11.1% |
| Meritage Homes | 1,986 | 1,647 | 20.6% | 1,556 | 1,368 | 13.7% | 380 | 368 | 3.3% |
| MDC Holdings | 1,481 | 1,419 | 4.4% | 1,126 | 1,158 | -2.8% | 410 | 372 | 10.2% |
| M/I Homes | 1,100 | 1,016 | 8.3% | 919 | 894 | 2.8% | 340 | 306 | 11.1% |
| Total | 29,357 | 25,809 | 13.7% | 24,788 | 22,014 | 12.6% | $345 | $329 | 4.7% |
Goldman: "What's Keeping the Kids at Their Parents' Homes?"
by Calculated Risk on 8/04/2015 12:05:00 PM
A few excerpts from a research note by Goldman Sachs economists David Mericle and Karen Reichgott: What's Keeping the Kids at Their Parents' Homes?
The share of 18-34 year-olds living with their parents rose about four percentage points (pp) during the recession and its aftermath, resulting in a few million extra "kids in the basement." This group accounts for the bulk of the recent shortfall in household formation and represents a potentially large pool of pent-up demand for homebuilding. While the share of young people living with their parents began to decline in 2014, the decline has stalled over the last six months ...
To what extent do current labor market conditions explain the elevated rate of young people living with their parents? ... We find that this current labor force status "composition effect" accounts for about 1.3pp, or roughly one-third of the "excess" kids living with their parents.
...
What accounts for the rest? Part of the explanation is likely that the legacy of the recession wears off only gradually ...
Three other factors might also have played a role. First, researchers at the New York Fed and the Fed Board have found evidence that rising student debt and poor credit scores have contributed to the elevated share of young people living with their parents. Second, the median age at first marriage has increased at a faster than usual rate since 2007 ... Third ... rent-to-income ratios are at historic highs, especially for young people. The future trajectory of these three factors is less clear, suggesting that the share of 18-34 year-olds living at home might not fully return to pre-recession rates.
...
What are the implications for the long-run homebuilding outlook? The pool of "excess" young people living at home is so large that even if only two-thirds ever move out and even if this process takes another decade, trend household formation would likely fall near the upper end of our 1.2-1.3mn forecast range. Combined with a 300k annual rate of demolitions, such a scenario would imply a trend demand for new housing units of about 1.6mn per year, well above the current sub-1.2mn run rate of housing starts. As a result, we continue to see plenty of upside for residential investment.
CoreLogic: House Prices up 6.5% Year-over-year in June
by Calculated Risk on 8/04/2015 09:11:00 AM
Notes: This CoreLogic House Price Index report is for June. The recent Case-Shiller index release was for May. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).
From CoreLogic: CoreLogic Reports National Home Prices Rose by 6.5 Percent Year Over Year in June 2015
CoreLogic® ... today released its June 2015 CoreLogic Home Price Index (HPI®) which shows that home prices nationwide, including distressed sales, increased by 6.5 percent in June 2015 compared with June 2014. This change represents 40 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, increased by 1.7 percent in June 2015 compared with May 2015.
Including distressed sales, 35 states and the District of Columbia were at or within 10 percent of their peak prices in June 2015. Fifteen states and the District of Columbia reached new price peaks—Alaska, Arkansas, Colorado, Hawaii, Iowa, Kentucky, Nebraska, New York, North Carolina, North Dakota, Oklahoma, South Dakota, Tennessee, Texas and Wyoming. The CoreLogic HPI begins in January 1976.
Excluding distressed sales, home prices increased by 6.4 percent in June 2015 compared with June 2014 and increased by 1.4 percent month over month compared with May 2015. ...
emphasis added
Click on graph for larger image. This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.
The index was up 1.7% in June (NSA), and is up 6.5% over the last year.
This index is not seasonally adjusted, and this was a solid month-to-month increase.
The second graph is from CoreLogic. The year-over-year comparison has been positive for forty consecutive months.The YoY increase had been moving sideways over most of the last year, but has picked up a little recently.
