by Calculated Risk on 4/21/2017 12:10:00 PM

Earlier: NAR: "Existing-Home Sales Jumped 4.4% in March"

A few key points:

1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus.  See: Lawler: Early Read on Existing Home Sales in March

"I project that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.74 million in March"

2) Warmer weather in February might have boosted sales for March and early April.

3) Inventory is still very low and falling year-over-year (down 6.6% year-over-year in March). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.

I expect inventory will be increasing year-over-year by the end of 2017.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Click on graph for larger image.

Sales NSA in March (red column) were the highest for March since 2006 (NSA).

Note that sales NSA are now in the seasonally strong period (March through September).

by Calculated Risk on 4/21/2017 10:09:00 AM

From the NAR: Existing-Home Sales Jumped 4.4% in March

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, ascended 4.4 percent to a seasonally adjusted annual rate of 5.71 million in March from a downwardly revised 5.47 million in February. March's sales pace is 5.9 percent above a year ago and surpasses January as the strongest month of sales since February 2007 (5.79 million).

Total housing inventory at the end of March increased 5.8 percent to 1.83 million existing homes available for sale, but is still 6.6 percent lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (unchanged from February).
emphasis added

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March (5.71 million SAAR) were 4.4% higher than last month, and were 5.9% above the March 2016 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.83 million in March from 1.75 million in February.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 6.6% year-over-year in March compared to March 2016.  

Months of supply was at 3.8 months in March.

This was above consensus expectations. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

by Calculated Risk on 4/21/2017 07:59:00 AM

From Black Knight: Black Knight’s First Look at March Mortgage Data: Delinquency Rate Drops to 11-Year Low; Prepayments Up 20 Percent from February’s Three-Year Low

• Delinquencies declined 14 percent month-over-month, hitting their lowest level since March 2006 and the fourth lowest point since the turn of the century

  • Total non-current inventory – all loans 30 days or more past due or in active foreclosure – fell below 2.3 million, the lowest volume in 11 years

  • After hitting a three-year low in February, prepayment speeds (historically a good indicator of refinance activity) rose 20 percent in March; still 26 percent below last year’s level

  • Foreclosure starts were up 4.15 percent for the month, but Q1 2017’s 189,000 starts represented an 18 percent decline from Q1 2016

According to Black Knight's First Look report for March, the percent of loans delinquent decreased 14.1% in March compared to February, and declined 11.4% year-over-year.

The percent of loans in the foreclosure process declined 4.6% in March and were down 29.2% 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 3.62% in March, down from 4.21% in February.

The percent of loans in the foreclosure process declined in March to 0.88%.

The number of delinquent properties, but not in foreclosure, is down 231,000 properties year-over-year, and the number of properties in the foreclosure process is down 183,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Mar 2017	Feb 2017	Mar 2016	Mar 2015
Delinquent	3.62%	4.21%	4.08%	4.66%
In Foreclosure	0.88%	0.93%	1.25%	1.68%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	1,831,000	2,135,000	2,062,000	2,349,000
Number of properties in foreclosure pre-sale inventory:	448,000	470,000	631,000	846,000
Total Properties	2,279,000	2,605,000	2,693,000	3,195,000

by Calculated Risk on 4/20/2017 07:58:00 PM

I expect existing home sales to be above the consensus forecast, see: Lawler: Early Read on Existing Home Sales in March

Friday:
• At 10:00 AM ET, Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.61 million SAAR, up from 5.48 million in February.

• Also at 10:00 AM, Regional and State Employment and Unemployment (Monthly) for March 2017

by Calculated Risk on 4/20/2017 03:45:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 15 April

The U.S. hotel industry reported negative results in the three key performance metrics during the week of 9-15 April 2017, according to data from STR.

Opposite from previous weeks, performance growth was negatively affected by the Easter calendar shift from 27 March 2016 to 16 April 2017. In comparison with the week of 10-16 April 2016, the industry reported the following:

• Occupancy: -4.6% to 64.3%
• Average daily rate (ADR): -0.2% to US$123.41
• Revenue per available room (RevPAR): -4.8% to US$79.33
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

The red line is for 2017, dashed is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

For hotels, occupancy will now move mostly sideways until the summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 4/20/2017 12:41:00 PM

From the National Multifamily Housing Council (NMHC): Apartment Markets Sluggish in the April NMHC Quarterly Survey

Despite moderate improvements over the first quarter of 2017, all four indexes of the National Multifamily Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions remained below the breakeven level of 50. The Market Tightness (41), Sales Volume (30), Equity Financing (42), and Debt Financing (41) all indicated continued softening conditions in apartment markets even as demand for apartment residences remains strong.

“Although all four indexes rose in April, they remain below the breakeven level of 50,” said Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist. “After years of lagging behind the increase in apartment demand, new supply is finally coming online in sufficient quantity to alter this supply-demand imbalance. In particular, class A supply in many urban core submarkets has led to increased concessions to fuel lease-up activity. Even so, occupancy rates remain close to historic highs.

“In the investment market, some of the weakness in property sales is seasonal, but respondents reported caution on the part of buyers as well as debt and equity capital sources – in particular in regard to construction lending. Increased uncertainty about the outlook for interest rates and cap rates also appears to be playing a role.”

The Market Tightness Index increased from 25 to 41, as one-fifth of respondents (20 percent) reported tighter conditions than three months ago, up from eight percent in January. Over one-third (38 percent) noted looser conditions. While this marks the sixth consecutive quarter of overall declining conditions, it does mark an uptick from the previous quarter.
emphasis added

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading below 50 indicates looser conditions from the previous quarter. This indicates market conditions were looser over the last quarter.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

This is the sixth consecutive quarterly survey indicating looser conditions - it appears supply has caught up with demand - and I expect rent growth to continue to slow.

by Calculated Risk on 4/20/2017 09:58:00 AM

Earlier from the Philly Fed: Current Indicators Continue to Reflect Growth

Results from the April Manufacturing Business Outlook Survey suggest that regional manufacturing activity continued to expand, but at a slower pace than last month. The diffusion indexes for general activity, new orders, and shipments remained positive but fell from their readings in March. The current employment index, however, improved slightly and continues to suggest expanding employment in the manufacturing sector. The survey’s future indicators continued to reflect general optimism but retreated from their high readings in the first three months of the year.
...
The index for current manufacturing activity in the region decreased from a reading of 32.8 in March to 22.0 this month. The index has been positive for nine consecutive months and remains at a relatively high reading but has moved down the past two months ...
...
Firms reported an increase in manufacturing employment and work hours this month. The percentage of firms reporting an increase in employment (27 percent) exceeded the percentage reporting a decrease (8 percent). The current employment index improved 2 points, its fifth consecutive positive reading. Firms also reported an increase in work hours this month: The average workweek index was nearly unchanged at 18.9 and has registered a positive reading for six consecutive months.
emphasis added

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through April), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

This suggests the ISM manufacturing index will show slower expansion in April (but still solid).

by Calculated Risk on 4/20/2017 08:35:00 AM

The DOL reported:

In the week ending April 15, the advance figure for seasonally adjusted initial claims was 244,000, an increase of 10,000 from the previous week's unrevised level of 234,000. The 4-week moving average was 243,000, a decrease of 4,250 from the previous week's unrevised average of 247,250.
emphasis added

The previous week was unrevised.

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 243,000.

This was at the consensus forecast.

The low level of claims suggests relatively few layoffs.

by Calculated Risk on 4/19/2017 07:15:00 PM

Some interesting comments from Dave Altig, Nicholas Parker and Brent Meyer at Macroblog: The Fed’s Inflation Goal: What Does the Public Know?

[O]ne natural question is whether the public is aware of this 2 percent target. We've posed this question a few times to our Business Inflation Expectations Panel, which is a set of roughly 450 private, nonfarm firms in the Southeast. These firms range in size from large corporations to owner operators.

Unsurprisingly, to us at least—and maybe to you if you're a regular macroblog reader—the typical respondent answered 2 percent (the same answer our panel gave us in 2015 and back in 2011). At a minimum, southeastern firms appear to have gotten and retained the message.
...
In a follow-up to our question about the numerical target, in the latest survey we asked our panel whether they thought the Fed was more, less, or equally likely to tolerate inflation below or above its target.

One in five respondents believes the Federal Reserve is more likely to accept inflation above its target, while nearly 40 percent believe it is more likely to accept inflation below its target. Twenty-five percent of firms believe the Federal Reserve is equally likely to accept inflation above or below its target. The remainder of respondents were unsure. This pattern was similar across firm sizes and industries.

In other words, more firms see the inflation target as a threshold (or ceiling) that the Fed is averse to crossing than see it as a symmetric target.
emphasis added

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 244 thousand initial claims, up from 234 thousand the previous week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for April. The consensus is for a reading of 26.0, down from 32.8.

by Calculated Risk on 4/19/2017 02:07:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before April 10, 2017."

Economic activity increased in each of the twelve Federal Reserve Districts between mid-February and the end of March, with the pace of expansion equally split between modest and moderate. In addition, the pickup was evident to varying degrees across economic sectors. Manufacturing continued to expand at a modest to moderate pace, although growth in freight shipments slowed slightly. Consumer spending varied as reports of stronger light vehicle sales were accompanied by somewhat softer readings in non-auto retail spending. Tourism and travel activity generally picked up. On balance, reports suggested that residential construction growth accelerated somewhat even as growth in home sales slowed, in part due to a lack of inventory. Nonresidential construction remained strong, but became more mixed in some regions; leasing activity generally improved at a more modest pace. More than half of the reports suggested that loan volumes increased, while only one said they were down modestly. Non-financial services generally continued to expand steadily. Energy-related businesses noted improved conditions while agricultural conditions varied.
...
Employment expanded across the nation and increases ranged from modest to moderate during this period. Labor markets remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers. Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply. A larger number of firms mentioned higher turnover rates and more difficulty retaining workers. A couple of Districts reported that worker shortages and increased labor costs were restraining growth in some sectors, including manufacturing, transportation, and construction. Businesses generally expected labor demand to increase moderately in the next six months, and looked for modest wage growth.
emphasis added

And a few excerpts on real estate:

Boston: Residential real estate markets in the First District continued to struggle with a shortage of inventory. All six First District states as well as the Greater Boston area reported large declines in inventory for both single-family homes and condos from February 2016 to February 2017. ... New York: Housing markets across the District have been mixed but, on balance a bit stronger since the last report, with ongoing slack at the high end of the market. New York City's rental market has been steady to somewhat weaker. Landlord concessions have grown more prevalent in an effort to keep rents and vacancy rates steady. Effective rents (factoring in these concessions) have continued to decline--particularly on larger units and particularly in Manhattan. Elsewhere, rents continued to rise in northern New Jersey but were mostly flat across upstate New York. ... San Franciso: Conditions in real estate markets remained stable, and activity remained strong in most of the District. Demand for residential real estate remained robust in most parts of the District. Overall, contacts reported that construction activity was slowed only by a lack of available land, labor, and materials. Sales of new and existing homes were robust, and inventories remained low, with one contact in Seattle reporting that new property listings remained on the market for only a couple of days.

Mostly inventories are low, and rents are soft.