by Calculated Risk on 4/26/2016 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for February ("February" is a 3 month average of December, January and February 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: Home Price Increases Slow Down in February According to the S&P/Case-Shiller Home Price Indices

The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 5.3% annual gain in February, unchanged from the previous month. The 10-City Composite increased 4.6% in the year to February, compared to 5.0% previously. The 20-City Composite’s year-over-year gain was 5.4%, down from 5.7% the prior month.
...
Before seasonal adjustment, the National Index posted a gain of 0.2% month-over-month in February. The 10-City Composite recorded a 0.1% month-over-month increase while the 20-City Composite posted a 0.2% increase in February. After seasonal adjustment, the National Index recorded a 0.4% month-over-month increase. The 10-City Composite posted a 0.6% increase and the 20-City Composite reported a 0.7% month-over-month increase after seasonal adjustment. Fourteen of 20 cities reported increases in February before seasonal adjustment; after seasonal adjustment, only 10 cities increased for the month.
emphasis added

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 11.4% from the peak, and up 0.6% in February (SA).

The Composite 20 index is off 9.7% from the peak, and up 0.7% (SA) in February.

The National index is off 3.0% from the peak, and up 0.4% (SA) in February.  The National index is up 31.0% from the post-bubble low set in December 2011 (SA).

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

The Composite 10 SA is up 4.6% compared to February 2015.

The Composite 20 SA is up 5.3% year-over-year..

The National index SA is up 5.3% year-over-year.

I'll have more on house prices later.

by Calculated Risk on 4/25/2016 06:49:00 PM

Earlier from the Dallas Fed: Texas Manufacturing Activity Expands Again

Texas factory activity increased for a second month in a row in April, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose from 3.3 to 5.8, suggesting a slight pickup in output growth.

Most other indexes of current manufacturing activity also reflected growth this month. The new orders index rebounded into positive territory after four months of negative readings, coming in at 6.2. ...

Labor market indicators reflected persistent weakness in April. The employment and hours worked indexes remained negative for the fourth straight month but rose to -3.7 and -1.0, respectively. Fourteen percent of firms noted net hiring, and 18 percent noted net layoffs in April.

This is the second consecutive month of manufacturing growth in Texas.

• At 8:30 AM ET, Durable Goods Orders for March from the Census Bureau. The consensus is for a 1.6% increase in durable goods orders.

• At 9:00 AM, S&P/Case-Shiller House Price Index for February. Although this is the February report, it is really a 3 month average of December, January and February prices. The consensus is for a 5.5% year-over-year increase in the Comp 20 index for February. The Zillow forecast is for the National Index to increase 5.3% year-over-year in February.

• At 10:00 AM, the Richmond Fed Survey of Manufacturing Activity for April.

by Calculated Risk on 4/25/2016 03:15:00 PM

The automakers will report April vehicle sales on Tuesday, May 3rd.

Note:  There were 27 selling days in April, up from 26 in April 2015.

From WardsAuto: Forecast: April Sales to Return to 17 Million SAAR Trend

WardsAuto forecast calls for U.S. automakers to deliver 1.52 million light vehicles in April, a record-high volume for the month.

The report puts the seasonally adjusted annual rate of sales for the month at 17.6 million units, well above last month’s 16.5 million and year-ago’s 16.7 million.
...
The monthly volume will be 5.0% above last year. Beyond an extra selling day, this April lacks the Easter holiday, allowing full sales over five weekends.
emphasis added

From J.D. Power: New-Vehicle Retail Sales Won’t Grow in April; Revised Full-Year Forecast Calls For Modest Increase Over 2015

Total light-vehicle sales in April are expected to reach 1,523,000, up 1% on a selling-day adjusted basis from 1,452,241 from a year ago and the strongest total sales in April on record.

The SAAR for total sales is projected at 17.6 million units in April 2016, up 0.8 million units from 16.7 million a year ago.

Looks like a strong month for vehicle sales.

by Calculated Risk on 4/25/2016 12:29:00 PM

The new home sales report for March was eleven thousand below expectations at 511,000 on a seasonally adjusted annual rate basis (SAAR), however combined sales for December, January and February were revised up by 23 thousand SAAR - so overall this was a decent report.

Sales were up 5.4% year-over-year (YoY) compared to March 2015. And sales are up 1.3% year-to-date compared to the same period in 2015.

Earlier: New Home Sales decreased to 511,000 Annual Rate in March.


Click on graph for larger image.

This graph shows new home sales for 2015 and 2016 by month (Seasonally Adjusted Annual Rate).

So far 2016 is barely ahead of 2015, although the comparisons for the first two months were difficult.   The comparisons through the summer will be easier.  Overall  I expect lower growth this year, probably in the 4% to 8% range.

Slower growth is likely this year because Houston (and other oil producing areas) will have a problem this year. Inventory of existing homes is increasing quickly and prices will probably decline in those areas. And that means new home construction will slow in those areas too.

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 several years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through March 2016. This graph starts in 1994, but the relationship had 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 more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

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 4/25/2016 10:11:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 511 thousand.

The previous three months were revised up by a total of 23 thousand (SAAR).

"Sales of new single-family houses in March 2016 were at a seasonally adjusted annual rate of 511,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 1.5 percent below the revised February rate of 519,000, but is 5.4 percent above the March 2015 estimate of 485,000."
emphasis added

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 fairly low historically.

The second graph shows New Home Months of Supply.

The months of supply was increased in March to 5.8 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 March was 246,000. This represents a supply of 5.8 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 March 2016 (red column), 48 thousand new homes were sold (NSA). Last year 46 thousand homes were sold in March.

The all time high for March was 127 thousand in 2005, and the all time low for March was 28 thousand in 2011.

This was below expectations of 522,000 sales SAAR in March, however prior months were revised up.  A decent report.  I'll have more later today.

by Calculated Risk on 4/25/2016 08:12:00 AM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA, FNC and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight Home Price Index Report: February 2016 Transactions -- U.S. Home Prices Up 0.7 Percent for the Month; Up 5.3 Percent Year-Over-Year

• U.S. home prices showed stronger monthly gains than they have since last April, rising 0.7% from January, and were up 5.3% from last year

• National home prices are now 27.5% above where they were at the bottom of the market at the start of 2012

• At $254K, the national level HPI is now just 5% off its June 2006 peak of $267K

• Strong upward monthly price movement was observed in many states and metro areas in February

• Of the nation’s 40 largest metros, 10 hit new peaks:
◦Austin, TX ($291K)
◦Dallas, TX ($224K)
◦Denver, CO ($339K)
◦Houston, TX ($223K)
◦Kansas City, MO ($174K)
◦Nashville, TN ($224K)
◦Portland, OR ($332K)
◦San Antonio, TX ($195K)
◦San Francisco, CA ($745K)
◦San Jose, CA ($891K)

The year-over-year increase in the index has been about the same for the last year.

by Calculated Risk on 4/24/2016 07:54:00 PM

An interesting article from the WSJ: Home-Price Surge Stymies First-Time Buyers

Home prices in the Dallas metro area, historically one of the nation’s most stable and affordable markets, have climbed at one of the fastest rates in the U.S. since 2014. Inventories of houses on the market are under two months’ supply, the lowest in 25 years.
...
“The demand is staggering,” said Ms. Durnal, an agent with real-estate brokerage firm Redfin.

The escalating prices and tightening availability of homes in Dallas point to the challenges facing many of the nation’s largest real-estate markets as the crucial spring selling season heats up.

With prices "escalating", where is the supply?   There are probably several reasons supply hasn't picked up.  As housing economist Tom Lawler noted several years, there has been a significant number of single family houses that have been converted to rentals.  These properties are mostly still being rented, reducing the potential pool.

Another reason for low supply is that new home sales are still historically low - partly because builders have focused on higher priced homes (this is changing a little with more entry level homes coming on the market).

And low supply can be self-fulfilling for a period of time since people only want to list their home for sale if they know they can find one to buy.

There could be a demographic reason too: Baby boomers are mostly aging in place and waiting until they are older (maybe closer to 80) to downsize.

Eventually this will change, and more inventory will come on the market.

 Weekend:
• Schedule for Week of April 24, 2016

Monday:
• 10:00 AM ET, New Home Sales for March from the Census Bureau. The consensus is for an increase in sales to 522 thousand Seasonally Adjusted Annual Rate (SAAR) in March from 512 thousand in February.

• 10:30 AM, Dallas Fed Manufacturing Survey for April.

From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures are up 3 and DOW futures are up 15 (fair value).

Oil prices were up over the last week with WTI futures at $43.49 per barrel and Brent at $45.11 per barrel.  A year ago, WTI was at $56, and Brent was at $62 - so prices are down about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.14 per gallon (down about $0.35 per gallon from a year ago).

by Calculated Risk on 4/24/2016 11:33:00 AM

The FOMC will meet on Tuesday and Wednesday, and no change to policy is expected.

There will no economic projections released at this meeting, and there is no scheduled press conference by Fed Chair Janet Yellen (in the unlikely event there is a change to policy, Yellen will probably hold a press conference).

So the focus will be on the FOMC statement.

The FOMC dropped the phrase about "balanced" risks from the statements in January and March, and the FOMC is expected to add the phrase back in the statement this week - to prepare the markets for a possible rate hike in June or July.

Here is the sentence from last October:

"The Committee continues to see the risks to the outlook for economic activity and the labor market as nearly balanced ..."

Another key will be the discussion of "global" risks. The March statement mentioned global risks twice:

"Information received since the Federal Open Market Committee met in January suggests that economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months."

and

"However, global economic and financial developments continue to pose risks."

There might be less concern in the statement about global risks in the April statement.

Also the FOMC might mention that growth has slowed in Q1 (Q1 GDP growth will be released on Thursday and is expected to show 0.7% annualized growth rate), and the statement might mention the pickup in the labor force participation rate.

The key - for a possible June rate hike - will be if the FOMC sees the risks as "balanced".

by Calculated Risk on 4/23/2016 08:09:00 AM

The key economic reports this week are the first estimate of Q1 GDP, March New Home sales, and the Case-Shiller House Price Index for February.

The FOMC is meeting on Tuesday and Wednesday, and no change in policy is expected at this meeting.

----- Monday, April 25th -----
10:00 AM: New Home Sales for March from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the February sales rate.

The consensus is for a increase in sales to 522 thousand Seasonally Adjusted Annual Rate (SAAR) in March from 512 thousand in February.

10:30 AM: Dallas Fed Manufacturing Survey for April.

----- Tuesday, April 26th -----
8:30 AM: Durable Goods Orders for March from the Census Bureau. The consensus is for a 1.6% increase in durable goods orders.

9:00 AM: S&P/Case-Shiller House Price Index for February. Although this is the February report, it is really a 3 month average of December, January and February prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the January 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.5% year-over-year increase in the Comp 20 index for February. The Zillow forecast is for the National Index to increase 5.3% year-over-year in February.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for April.

----- Wednesday, April 27th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Pending Home Sales Index for March. The consensus is for a 0.5% increase in the index.

2:00 PM: FOMC Meeting Announcement.  The FOMC is expected to make no change to policy at this meeting.

----- Thursday, April 28th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 260 thousand initial claims, up from 247 thousand the previous week.

8:30 AM ET: Gross Domestic Product, 1st quarter 2016 (Advance estimate). The consensus is that real GDP increased 0.7% annualized in Q1.

11:00 AM: Kansas City Fed Survey of Manufacturing Activity for April. This is the last of the regional Fed manufacturing surveys for April.

----- Friday, April 29th -----
8:30 AM ET: Personal Income and Outlays for March. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.1%.

9:45 AM: Chicago Purchasing Managers Index for April. The consensus is for a reading of 53.4, down from 53.6 in March.

10:00 AM: University of Michigan's Consumer sentiment index (final for April). The consensus is for a reading of 90.4, up from the preliminary reading 89.7.

by Calculated Risk on 4/22/2016 08:42:00 PM

Update: The Dumb Money recommends reading The California Weather Blog: California drought update; April showers in NorCal; and La Niña Looms. Much more detail and analysis (not a bad year in NorCal) ...

El Niño was a bust this winter in California. Although the state received more precipitation than the previous four years - that isn't saying much.

Here are a few resources to track the drought. These tables show the snowpack in the North, Central and South Sierra. Currently the snowpack is about 56% of normal for this date.

And here are some plots comparing the current and previous years to the average, a very dry year ('76-'77) and a wet year ('82-'83). This winter was close to an average year in the North and Central Sierra, but below average in the southern section.

For Pacific Crest Trail and John Muir Trail hikers, I recommend using the Upper Tyndall Creek sensor to track the snow conditions. This is the fifth dry year in a row along the JMT - although more snow than the previous four years. There will probably be adequate water and not too much snow on the passes.

This graph shows the snow water content for Upper Tyndall Creek for the last 20 years. There is more snow than the previous four years, but that isn't saying much. Note: I hiked the trail in September 1998 - a very wet year - and there was snow all year on Whitney.