by Calculated Risk on 6/19/2016 08:41:00 PM

The Brexit vote is on Thursday ...

Weekend:
• Schedule for Week of June 19, 2016

From CNBC: Pre-Market Data and Bloomberg futures: S&P are up 14 and DOW futures are up 140 (fair value).

Oil prices were down over the last week with WTI futures at $48.24 per barrel and Brent at $49.39 per barrel.  A year ago, WTI was at $60, and Brent was at $61 - so prices are down 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.33 per gallon (down about $0.45 per gallon from a year ago).

by Calculated Risk on 6/19/2016 11:43:00 AM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

From the Port of Los Angeles: Double-Digit Growth Propels Port of Los Angeles to Busiest May in Port History

Overall cargo volumes at the Port of Los Angeles increased nearly 11 percent in May compared to the same period last year, marking the busiest May in the Port’s 109-year history. Total volumes registered at 770,409 Twenty-Foot Equivalents (TEUs), with container growth of 8.7 percent for the first five months of 2016 compared to last year.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was up 0.7% compared to the rolling 12 months ending in April.   Outbound traffic was up 0.4% compared to 12 months ending in April.

The downturn in exports over the last year was probably due to the slowdown in China and the stronger dollar.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March (depending on the timing of the Chinese New Year).

In general exports are moving sideways and imports are gradually increasing.

by Calculated Risk on 6/18/2016 08:09:00 AM

The key economic reports this week are New and Existing Home Sales for May.

Fed Chair Janet Yellen will deliver the Semiannual Monetary Policy Report to the Congress on Tuesday and Wednesday.

----- Monday, June 20th -----
No economic releases are scheduled.

----- Tuesday, June 21st -----
10:00 AM ET: Testimony, Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Banking, Housing, and Urban Affairs, U.S. Senate, Washington, D.C.

----- Wednesday, June 22nd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

9:00 AM: FHFA House Price Index for April 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.6% month-to-month increase for this index.

10:00 AM: Existing Home Sales for May from the National Association of Realtors (NAR). The consensus is for 5.57 million SAAR, up from 5.45 million in April.

Housing economist Tom Lawler expects the NAR to report sales of 5.55 million SAAR in May.

10:00 AM ET: Testimony, Fed Chair Janet Yellen, Semiannual Monetary Policy Report to the Congress, Before the Committee on Financial Services, U.S. House of Representatives, Washington, D.C.

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

----- Thursday, June 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, down from 277 thousand the previous week.

8:30 AM ET: Chicago Fed National Activity Index for May. This is a composite index of other data.

10:00 AM ET: New Home Sales for May from the Census Bureau.

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

The consensus is for a decrease in sales to 565 thousand Seasonally Adjusted Annual Rate (SAAR) in May from 619 thousand in April.

----- Friday, June 24th -----
8:30 AM: Durable Goods Orders for May from the Census Bureau. The consensus is for a 0.7% decrease in durable goods orders.

10:00 AM: University of Michigan's Consumer sentiment index (final for June). The consensus is for a reading of 94.1, down from the preliminary reading 94.0, and down from 94.7 in May.

by Calculated Risk on 6/17/2016 06:20:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC:

"US horizontal oil rig counts were up 2 this week to 265, now 17 off the cycle trough five weeks ago.
...
US vertical rigs were up sharply, +7 to 48. We can now call the cycle bottom here for May 27."

Click on graph for larger image.

Graph Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

CR Note: This graph is horizontal rig count only (not vertical).  The increase is still pretty minor.

by Calculated Risk on 6/17/2016 12:59:00 PM

Earlier: Housing Starts decreased to 1.164 Million Annual Rate in May

The housing starts report this morning was close to consensus, and there were upward revisions to the prior two months (combined).  Also starts were up 9.5% from May 2015.

The key take away from the report is that multi-family is slowing, and single family growth is ongoing year-over-year.

Click on graph for larger image.

This graph shows the month to month comparison between 2015 (blue) and 2016 (red).

Year-to-date starts are up 10.2% compared to the same period in 2015, but that will slow further with the more difficult comparisons for the remainder of the year.

Multi-family starts are up 2.5% year-to-date, and single-family starts are up 14.5% year-to-date.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily over the last few years, and completions (red line) have lagged behind - but completions have been catching up (more deliveries), and will continue to follow starts up (completions lag starts by about 12 months).

I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

The housing recovery continues, however I expect most of the growth will be from single family going forward.

by Calculated Risk on 6/17/2016 10:18:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were significantly higher in May in 5 states, lower in 4 states and the District of Columbia, and stable in 41 states, the U.S. Bureau of Labor Statistics reported today.
...
South Dakota and New Hampshire had the lowest jobless rates in May, 2.5 percent and 2.7 percent, respectively. The rate in Arkansas (3.8 percent) set a new series low. (All region, division, and state series begin in 1976.) Alaska had the highest unemployment rate, 6.7 percent.
emphasis added

Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976.

The states are ranked by the highest current unemployment rate. Alaska, at 6.7%, had the highest state unemployment rate.

The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 7% (light blue); Only seven states and D.C are at or above 6% (dark blue).

by Calculated Risk on 6/17/2016 08:38:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,164,000. This is 0.3 percent below the revised April estimate of 1,167,000, but is 9.5 percent above the May 2015 rate of 1,063,000.

Single-family housing starts in May were at a rate of 764,000; this is 0.3 percent above the revised April figure of 762,000. The May rate for units in buildings with five units or more was 396,000

Building Permits:
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,138,000. This is 0.7 percent above the revised April rate of 1,130,000, but is 10.1 percent below the May 2015 estimate of 1,266,000.

Single-family authorizations in May were at a rate of 726,000; this is 2.0 percent below the revised April figure of 741,000. Authorizations of units in buildings with five units or more were at a rate of 381,000 in May.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in May compared to April.  Multi-family starts are up 8% year-over-year.

Single-family starts (blue) increased in May, and are up 10% year-over-year.



The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

Total housing starts in May were close to expectations, and combined starts for March and April were revised up slightly.  I'll have more later ...

by Calculated Risk on 6/16/2016 08:45:00 PM

Friday:
• At 8:30 AM,Housing Starts for May. Total housing starts increased to 1.172 million (SAAR) in April. Single family starts increased to 778 thousand SAAR in April. The consensus is for 1.160 million in May, down from the April rate.

• At 10:00 AM, Regional and State Employment and Unemployment for May 2016

From Matthew Graham at Mortgage News Daily: Mortgage Rates Deeper into 3-Year Lows

[W]e find ourselves well into the lowest rates in more than three years, even if the pace of improvement is lagging the drop in US Treasury rates. ... The average lender is now down to 3.5% in terms of conventional 30yr fixed quotes for top tier scenarios.

Mortgage rates are getting close to all time lows.

by Calculated Risk on 6/16/2016 04:45:00 PM

From housing economist Tom Lawler:

Based on publicly-available state and local realtor/MLS reports from across the country released through today, I project that May existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.55 million in May, up 1.8% from April’s preliminary pace and up 4.9% from last May’s seasonally adjusted pace. Unadjusted sales should show a slightly higher YOY % gain, reflecting this May’s higher business-day count.

Local realtor/MLS data also suggest that existing home listings increased only slightly on the month (and by less than last May’s MoM gain), and I project that the inventory of existing homes for sale as estimated by the NAR for the end of May will be 2.16 million, up 0.9% from April’s preliminary estimate and down 5.3% from last May. Finally, I project that the NAR’s estimate of the median existing single-family home sales price for May will be up 5.3% YOY.

CR Note: The NAR is scheduled to release May Existing Home sales next Wednesday, and the early consensus is 5.64 million SAAR (probably too high).

by Calculated Risk on 6/16/2016 02:45:00 PM

From housing economist Tom Lawler: Single-Family Home Production in 2015: Small Number, Big Homes

At the beginning of June the Census Bureau released its annual report for 2015 on the characteristics of new privately-owned residential structures, including but not limited to square footage, number of bedrooms and bathrooms, type of wall material, and sales prices. In terms of single-family homes completed last year, one of the more striking aspects of the report was the incredibly small number of modestly-sized single-family homes completed last year. Below is a summary of homes completed from 1999 to 2015 by square-footage ranges.

Of the estimated 648,000 single-family homes completed last year, just 136,000, or 21%, were homes with square footage of less than 1,800. The number of “moderately-sized” single-family homes completed in 2015 was little changed 2011, when overall single-family home completions hit at a “record” low. In sharp contrast, the number of homes with 3,000 or more square feet of floor area last year was up 76% from 2011’s level.

Single-Family Homes Completed by Square Footage
	Number of houses (in thousands) by square feet
Year	Total	Under 1,400	1,400 to 1,799	1,800 to 2,399	2,400 to 2,999	3,000 to 3,999	4,000 or more
1999	1,270	197	276	370	211	157	59
2000	1,242	178	268	363	208	158	66
2001	1,256	167	261	359	222	172	75
2002	1,325	172	283	375	240	180	76
2003	1,386	179	279	401	251	199	77
2004	1,532	186	311	433	291	219	92
2005	1,636	165	317	467	306	262	119
2006	1,654	164	312	452	326	263	137
2007	1,218	120	220	335	227	202	115
2008	819	104	146	219	138	127	84
2009	520	66	106	139	89	72	48
2010	496	66	96	135	87	75	37
2011	447	57	84	111	79	76	40
2012	483	53	83	126	93	88	40
2013	569	46	89	154	115	110	56
2014	620	48	87	162	131	127	66
2015	648	49	87	171	138	132	72

Click on graph for larger image.

Here is a chart showing the historical median square footage of single-family homes completed.

It is a little difficult to compare the distribution of single-family homes completed in recent years relative to earlier decades, because Census has changed the square-footage ranges in its reports over time. However, from 1999 to 2007 there are data for both the “old” ranges and the “new” ranges, and by looking at some historical relationships one can approximate completions for various ranges over time, which I have done in the table below.

Average Annual Single-Family Homes Completed by Square Feeet of Floor Area
	Total	<1,600	1,600- 1,999	2000- 2,399	2,400- 2,999	3,000+
1973-79	1,140	574	259	158	94	55
1980-89	978	453	207	134	108	75
1990-99	1,070	319	242	189	170	151
2000-09	1,259	269	261	224	230	274
2010	496	111	101	85	87	112
2011	447	96	86	70	79	116
2012	483	92	91	79	93	128
2013	569	88	104	97	115	166
2014	620	89	106	102	131	193
2015	648	90	109	108	138	204
(LEHC estimates based on Census data. Totals may not add up due to rounding).

There have been numerous articles over the last year or two discussing some of the possible reasons for the dearth of construction of moderately-sized (and priced) single-family homes over the past few years, and I won’t today discuss the “why’s.” However, it seems highly unlikely that single-family starts (and completions) will move back up to more “historic” levels unless there is a rebound in the construction of “smaller,” and less expensive, homes.