by Calculated Risk on 5/18/2017 01:03:00 PM

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 several years, not much changed. But in 2012 and 2013, we saw some significant changes with a dramatic shift from distressed sales to more normal equity sales.

This data suggested healing in the Sacramento market and other distressed markets showed similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In April, total sales were down 2.7% from April 2016, and conventional equity sales were down 0.8% compared to the same month last year.

In April, 4.7% of all resales were distressed sales. This was down from 5.5% last month, and down from 6.5% in April 2016.

The percentage of REOs was at 2.8%, and the percentage of short sales was 1.9%.

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 15.7% year-over-year (YoY) in April.  This was the 24th consecutive monthly YoY decrease in inventory in Sacramento.

Cash buyers accounted for 15.6% of all sales - this has been generally declining (frequently investors).

Summary: This data suggests a normal market with few distressed sales, and less investor buying - but with limited inventory.

by Calculated Risk on 5/18/2017 09:11:00 AM

From the Philly Fed: Current Indicators Reflect Continued Growth

Results from the May Manufacturing Business Outlook Survey suggest that regional manufacturing activity continued to expand this month. The diffusion indexes for general activity and shipments improved notably from their April readings. The indexes for new orders and employment, however, fell modestly from last month but remained at high readings. Although most of the survey’s future indicators fell this month, the readings suggest that most firms still expect growth to continue over the next six months.
...
The index for current manufacturing activity in the region increased from a reading of 22.0 in April to 38.8 this month. The index has been positive for 10 consecutive months. This month, the index recovered some of the declines of the previous two months, but it still remains slightly below its high reading of 43.3 in February ...
...
Firms reported an increase in manufacturing employment this month, but the current employment index fell 3 points. The index has remained positive for six consecutive months. The percentage of firms reporting an increase in employment was 23 percent, lower than the 27 percent that reported increases in April. Firms also reported an increase in work hours this month: The average workweek index remained positive for the seventh consecutive month and increased 3 points.
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 May), and five Fed surveys are averaged (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

This suggests the ISM manufacturing index will show solid expansion in May.

by Calculated Risk on 5/18/2017 08:33:00 AM

The DOL reported:

In the week ending May 13, the advance figure for seasonally adjusted initial claims was 232,000, a decrease of 4,000 from the previous week's unrevised level of 236,000. The 4-week moving average was 240,750, a decrease of 2,750 from the previous week's unrevised average of 243,500.
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 240,750.

This was lower than the consensus forecast.

The low level of claims suggests relatively few layoffs.

by Calculated Risk on 5/17/2017 05:25:00 PM

From Matthew Graham at Mortgage News Daily: Rates Respond to Political Scandal by Plummeting to 2017 Lows

Mortgage rates surged significantly lower today, as a part of a broad-based market movement following a political scandal that began taking shape yesterday afternoon.  You can choose your preferred media outlet to digest all of the details, but the issue surrounds communications between Trump, former FBI Director Comey, and the potential for the details of those communications to be demanded by House Oversight Chair Chaffetz.
...
We're often talking about just how small the day-to-day movements are that we're tracking in these daily write-ups.  Today was an exception, with most lenders moving a full eighth of a percentage point lower in rate.  That's the king of improvement we only see a few times a year.  This time, it brought conventional 30yr fixed rates to the best levels of 2017.  Many of the best-qualified borrowers will be seeing quotes in the 3.875%-4.0% range now as opposed to 4.0-4.125% before today.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 5/17/2017 01:45:00 PM

From housing economist Tom Lawler:

Based on publicly available state and local realtor/MLS reports released through today, I project that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.56 million in April, down 2.6% from March’s preliminary pace and up 1.5% from last April’s seasonally adjusted pace. Unadjusted sales as estimated by the NAR last month should be about 2.8% LOWER than last April’s pace, with the “adjusted/unadjusted” YOY growth difference reflecting this April’s lower business day count, as well as the different timing of Easter (April 16 this year vs. March 27 last year.)

On the inventory front, local realtor/MLS data suggest that the monthly increase in the number of homes for sale last month was slightly higher than last April’s increase, and I project that the NAR’s estimate of the existing home inventory for April will be 2.00 million, up 9.3% from March and down 5.7% from last April.

Finally, realtor/MLS suggest that the NAR’s estimate of the median existing single-family home sales price for April will be up about 7.0% from last April.

Areas that experienced a double-digit decline in YOY home sales included, but were not limited to, Portland (Oregon), Minneapolis, DC (city), San Francisco Bay Area, Boston, New Hampshire, South Central Wisconsin (includes Dane County), Spokane, Peoria, Springfield (Illinois), Louisville, and Grand Rapids.
emphasis added

CR Note: The NAR is scheduled to release existing home sales for April next Wednesday, May 24th. The early consensus is for sales of 5.71 million SAAR (take the under).

by Calculated Risk on 5/17/2017 11:13:00 AM

The Q1 report was released today: Household Debt and Credit Report.

From the NY Fed: Household Debt Surpasses its Peak Reached During the Recession in 2008

The Federal Reserve Bank of New York today issued its Quarterly Report on Household Debt and Credit, which reported that total household debt reached $12.73 trillion in the first quarter of 2017 and finally surpassed its $12.68 trillion peak reached during the recession in 2008. This marked a $149 billion (1.2%) quarterly increase and nearly three years of continued growth since the long period of deleveraging following the Great Recession.
...
“Almost nine years later, household debt has finally exceeded its 2008 peak but the debt and its borrowers look quite different today. This record debt level is neither a reason to celebrate nor a cause for alarm. But it does provide an opportune moment to consider debt performance,” said Donghoon Lee, Research Officer at the New York Fed. “While most delinquency flows have improved markedly since the Great Recession and remain low overall, there are divergent trends among debt types. Auto loan and credit card delinquency flows are now trending upwards, and those for student loans remain stubbornly high.”

Mortgage balances increased again while originations declined and median credit scores of borrowers for new mortgages increased, reflecting tightening underwriting.

Mortgage delinquencies worsened slightly and foreclosure notations increased but remained low by historical standards.
...
Bankruptcy notations reached another low the 18-year history of this series.

This quarter saw a notable uptick in credit card debt transitioning into delinquencies, a continued upward trend of auto loans transitioning into serious delinquencies, and student loan transitions into serious delinquencies remaining high.
emphasis added

Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q1.  Household debt previously peaked in 2008, and bottomed in Q2 2013.

Mortgage debt increased in Q1, from the NY Fed:

Mortgage balances, the largest component of household debt, increased again during the first quarter. Mortgage balances shown on consumer credit reports on March 31 stood at $8.63 trillion, an increase of $147 billion from the fourth quarter of 2016. Balances on home equity lines of credit (HELOC) declined by $17 billion and now stand at $456 billion. Non-housing balances were mixed in the first quarter. Auto loans and student loan balances grew, by $10 billion and $34 billion respectively, while credit card balances declined by $15 billion.

The second graph shows the percent of debt in delinquency. There is still a larger than normal percent of debt 90+ days delinquent (Yellow, orange and red).

The overall delinquency rate was mostly unchanged in Q1.  From the NY Fed:

Aggregate delinquency rates were roughly flat in the first quarter of 2017, with some variation across product types. As of March 31, 4.8% of outstanding debt was in some stage of delinquency. Of the $615 billion of debt that is delinquent, $426 billion is seriously delinquent (at least 90 days late or “severely derogatory”).

by Calculated Risk on 5/17/2017 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 4.1 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 12, 2017.

... The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 9 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) remained unchanged at 4.23 percent, with points increasing to 0.37 from 0.31 (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 since 1990.

Refinance activity remains low - and will not increase significantly unless rates fall sharply.


The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 9% year-over-year.

by Calculated Risk on 5/16/2017 07:38:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Back at 2-Week Lows

Compared to yesterday, mortgage rates are either a little bit higher or lower depending on the lender at the moment.  On average, they've inched just past last Friday's levels, meaning they're the lowest in 2 weeks.

As nice as that sounds, it's worth noting that we're really splitting hairs here.  Most anyone pricing out a mortgage right now won't see any difference in their rate quote over the past few days.  The biggest drop occurred last Friday and we haven't seen appreciable movement since then.   Most lenders continue to quote conventional 30yr fixed rates in a range of 4.0-4.25% for top tier scenarios, with 4.125% being the most prevalent.br /> emphasis added

Thursday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 11:00 AM, The New York Fed will release their Q1 2017 Household Debt and Credit Report

by Calculated Risk on 5/16/2017 02:12:00 PM

Earlier: Housing Starts decreased to 1.172 Million Annual Rate in April

The housing starts report released this morning showed starts were down in April compared to March, and were up 0.7% year-over-year compared to April 2016.

Note that multi-family is frequently volatile month-to-month, and has seen especially wild swings over the last year.

This first graph shows the month to month comparison between 2016 (blue) and 2017 (red).

Click on graph for larger image.

Starts were up 0.7% in April 2017 compared to April 2016, and starts are up 5.3% year-to-date.

Note that single family starts are up 7.0% year-to-date, and the weakness (as expected) has been in multi-family starts.

My guess is starts will increase around 3% to 7% in 2017.

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 - but has been moving more sideways recently.  Completions (red line) have lagged behind - but completions have been generally catching up (more deliveries).  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 a few years of increasing single family starts and completions.

by Calculated Risk on 5/16/2017 10:39:00 AM

From the MBA: Delinquencies Decline in Latest MBA Mortgage Delinquency Survey

The delinquency rate for mortgage loans on one- to four-unit residential properties decreased to a seasonally adjusted rate of 4.71 percent of all loans outstanding at the end of the first quarter of 2017.  The delinquency rate was down nine basis points from the previous quarter, and was six basis points lower than one year ago, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

The percentage of loans on which foreclosure actions were started during the first quarter was 0.30 percent, an increase of two basis points from the previous quarter, but five basis points lower than one year ago.

The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure.  The percentage of loans in the foreclosure process at the end of the first quarter was 1.39 percent, down 14 basis points from the fourth quarter and 35 basis points lower than one year ago.

The serious delinquency rate, the percentage of loans that are 90 days or more past due or in the process of foreclosure, was 2.76 percent, a decrease of 37 basis points from last quarter, and a decrease of 53 basis points from last year.

Marina Walsh, MBA's Vice President of Industry Analysis, offered the following commentary on the survey:

"Mortgage delinquencies decreased overall in the first quarter of 2017, driven by a drop in both the FHA and VA delinquency rates from the previous quarter as the conventional delinquency rate held constant.  Employment growth started 2017 on strong footing, with the economy adding 216,000 jobs in January 2017 and 232,000 jobs in February. Average hourly wage growth increased 2.8 percent over the year, and has maintained a generally increasing trend since late 2015. These fundamentals have helped to support the performance of all loan types - whether FHA, VA or conventional loans.
...
"In addition, nearly all states had a decrease in the percentage of loans in foreclosure in the first quarter.  The overall percentage of loans in the process of foreclosure was 1.39 percent, its lowest level since the first quarter of 2007. While judicial states still had more than three times the percent of loans in foreclosure as non-judicial states, that measure declined to the lowest level since the fourth quarter of 2007."
emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.

Note that the total percent delinquencies and foreclosures is below the 2002 level.

The percent of loans 30 and 60 days delinquent increased in Q1, but is below the normal historical level.

The 90 day bucket decreased in Q1, but remains a little elevated.

The percent of loans in the foreclosure process continues to decline, but is still above the historical average.

The 90 day bucket and foreclosure inventory are still elevated, but should be close to normal in 2017.   Most other mortgage measures are already back to normal, however the lenders are still working through the backlog of bubble legacy loans - especially in judicial foreclosure states.