by Calculated Risk on 8/11/2017 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in July on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.7 percent.
...
The index for all items less food and energy rose 0.1 percent, the fourth month in a row it increased by that amount. ... The index for all items less food and energy also rose 1.7 percent for the 12 month period, the same increase as for the 12 months ending May and June.
emphasis added

I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was below the consensus forecast of a 0.2% increase for CPI, and above the forecast of a 0.2% increase in core CPI.

by Calculated Risk on 8/10/2017 05:59:00 PM

From Professor Krugman: How Bad Will It Be If We Hit The Debt Ceiling?

[I]t looks fairly likely that by October or so there will come a day when the U.S. government stops paying some of its bills, including interest on debt.

How bad will that be? The truth is that we don’t know ...
...
Suppose that everyone expected normal payments to resume, with back interest, in a couple of weeks. In that case, even a slight discount on, say, Treasury bills would make them a very good investment — so speculators would basically step in and support the value of U.S. debt despite temporary default. In that case default might not be that big a deal.

The big problem would come if investors see the default as more than a temporary glitch — if they see it as a sign of enduring, critical dysfunction in American governance. In that case they wouldn’t necessarily step in to buy our debt, and their confidence in the whole economic edifice would take a severe hit.

CR Note: My guess is the U.S. government will pay their bills, but you never know. (For more, see Goldman on the "Debt Limit").

Friday:
• At 8:30 AM ET, The Consumer Price Index for July from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.

by Calculated Risk on 8/10/2017 03:33:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 5 August

The U.S. hotel industry reported mostly negative year-over-year results in the three key performance metrics during the week of 30 July through 5 August 2017, according to data from STR.

In comparison with the week of 31 July through 6 August 2016, the industry recorded the following:

• Occupancy: -1.5% to 74.5%
• Average daily rate (ADR): +0.7% to US$129.00
• Revenue per available room (RevPAR): -0.8% to US$96.08
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, dash light blue is 2016, dashed orange is 2015 (best year on record), blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels).

Currently the occupancy rate is tracking close to last year, and behind the record year in 2015.

Seasonally, the occupancy rate will remain strong over the next few weeks and then decline into the Fall.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 8/10/2017 11:33:00 AM

Fannie and Freddie reported results last week. Here is some information on Real Estate Owned (REOs).

Freddie Mac reported the number of REO declined to 9,915 at the end of Q2 2017 compared to 13,284 at the end of Q2 2016.

For Freddie, this is down 87% from the 74,897 peak number of REOs in Q3 2010. For Freddie, this is the lowest since at least 2007.

Fannie Mae reported the number of REO declined to 31,371 at the end of Q2 2017 compared to 45,981 at the end of Q2 2016.

For Fannie, this is down 81% from the 166,787 peak number of REOs in Q3 2010. For Fannie, this is the lowest since at least 2007.

Click on graph for larger image.

Here is a graph of Fannie and Freddie Real Estate Owned (REO).

REO inventory decreased in Q2 for both Fannie and Freddie, and combined inventory is down 30% year-over-year.

There are still a number of properties in the foreclosure process with long time lines in judicial foreclosure states - but this is close to normal levels of REOs.

by Calculated Risk on 8/10/2017 08:33:00 AM

The DOL reported:

In the week ending August 5, the advance figure for seasonally adjusted initial claims was 244,000, an increase of 3,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 240,000 to 241,000. The 4-week moving average was 241,000, a decrease of 1,000 from the previous week's revised average. The previous week's average was revised up by 250 from 241,750 to 242,000.
emphasis added

The previous week was revised up.

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 241,000.

This was higher than the consensus forecast.

The low level of claims suggests relatively few layoffs.

by Calculated Risk on 8/09/2017 06:38:00 PM

From Matthew Graham at Mortgage News Daily: New 2017 Lows for Rates, But There's a Catch

Mortgage rates fell to new lows for the year today, following the North Korea nuclear threat headlines.  In truth, the preceding sentence gives too much credit to geopolitical risk.  Rates were already drifting very close to the lowest levels since the election, even before yesterday's news broke.  Additionally, the improvements are still too small to be translating to NOTE rates themselves (the actual interest rate applied to your loan balance).  Instead, it's the upfront costs that are allowing for fine-tuning adjustments.  (This means the EFFECTIVE rate is changing, but not the NOTE rate.) [30YR FIXED - 4.00%]

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 241 thousand initial claims, up from 240 thousand the previous week.

• Also at 8:30 AM, The Producer Price Index for July from the BLS. The consensus is a 0.1% increase in PPI, and a 0.2% increase in core PPI.

by Calculated Risk on 8/09/2017 01:30:00 PM

Here is another update on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs - and prices are once again near the bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand).

In 2015, even with the pickup in U.S. housing starts, prices were down year-over-year.  Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.  This decline in 2015 was also probably related to weakness in China.

Prices in 2017 are up solidly year-over-year and once again approaching the housing bubble highs.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through June 2017 (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are up 16% from a year ago, and CME futures are up about 19% year-over-year.

There is a seasonal pattern for lumber prices. Prices frequently peak around May, and bottom around October or November - although there is quite a bit of seasonal variability.

by Calculated Risk on 8/09/2017 09:34:00 AM

A few brief excerpts from some analysis by Goldman Sachs economists:

The Treasury projects that the debt limit will need to be raised by September 29, and we expect Congress to take at least that long to raise it.
...
What happens if Congress does not raise it in time?

Scheduled federal payments would be delayed and financial markets would be disrupted. The primary consequence of a failure to raise the debt limit before October 2 would be a likely failure to make some payments on that day or soon thereafter. This could include, for example, the main monthly payment to Social Security beneficiaries, which occurs on the 3rd of every month. All told, the decline in federal payments that would be necessary to avoid breaching the debt limit would be roughly equal to the budget deficit, resulting in a temporary fiscal contraction of 3-4% of GDP for the period the debt limit is binding. A sharp decline like this would likely be disruptive to financial markets and could have consequences for the real economy, which is why Congress has managed to avoid such an outcome in the past.

CR note: I'll have much more on the "debt limit" as the deadline approaches. I've written about this nonsense before, from 2011:

Unfortunately "debt ceiling" sounds virtuous, but it isn't - it is actually a question of "paying the bills".

And here from 2014:

There are certain politicians who think it is OK to not pay the bills as long as the U.S. makes interest and principal payments on the debt.  That is crazy talk.  There is a name for people who don't pay their bills: deadbeats.  If politicians don't pay their personal bills, they are deadbeats.  But if they stop the government from paying the bills, we are all deadbeats.  And there will be serious economic consequences for not paying the bills on time.  The consequences will build over time, but in a few months, not "paying the bills" will ripple through the entire economy.
...
The only smart vote would be to eliminate the debt ceiling vote in the future, and let the annual budget process automatically set the debt limit. But then there wouldn't be as much camera time ...

by Calculated Risk on 8/09/2017 07:00:00 AM

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

Mortgage applications increased 3.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 4, 2017.

... The Refinance Index increased 5 percent from the previous week. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 0.3 percent compared with the previous week and was 7 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) decreased to 4.14 percent from 4.17 percent, with points increasing to 0.38 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 since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall well below 4%.


The second graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year.

by Calculated Risk on 8/08/2017 05:18:00 PM

Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data Analytics: Dodge Momentum Index Stumbles in July

The Dodge Momentum Index fell in July, dropping 3.3% to 135.0 (2000=100) from its revised June reading of 139.6. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. The move lower in July was due to a 6.6% decline in the institutional component of the Momentum Index, while the commercial component fell 1.1%.This month continues a recent trend of volatility in the Momentum Index where a string of gains is interrupted by a step backwards in planning intentions. Despite the decline from June to July, the Momentum Index is 6.9% higher than one year ago, which suggests further moderate gains in construction activity throughout the year. The commercial component of the Momentum Index is 8.0% higher than last year, while the Institutional component is 5.3% higher.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 135.0 in July, down from 139.6 in June.

The index is still up 6.9% year-over-year.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further increases in CRE spending over the next year.