by Calculated Risk on 9/11/2017 11:00:00 AM

During the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.

Since then Las Vegas visitor traffic has recovered to new record highs.

As of July, visitor traffic is running slightly behind the record set in 2016 and on pace to be 10% above the pre-recession peak.

And convention attendance is now at record levels too. Here is the data from the Las Vegas Convention and Visitors Authority.  

Click on graph for larger image.

The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale). 

At this pace, convention attendance will set another new record in 2017, and be 5% above the pre-recession peak set in 2006.

There were many housing related conventions during the housing bubble, so it took some time for convention attendance to recover.  But attendance has really picked up over the last three years.

by Calculated Risk on 9/11/2017 08:11:00 AM

Black Knight Financial Services (BKFS) released their Mortgage Monitor report for July today. According to BKFS, 3.90% of mortgages were delinquent in July, down from 4.51% in July 2016. BKFS also reported that 0.78% of mortgages were in the foreclosure process, down from 1.09% a year ago.

This gives a total of 4.68% delinquent or in foreclosure.

Press Release: Black Knight’s Mortgage Monitor: Purchase Lending Hits Highest Level Since 2007 Despite Continued Headwinds from Tight Lending; Refinance Share at 16-Year Low

Today, the Data & Analytics division of Black Knight Financial Services, Inc. released its latest Mortgage Monitor Report, based on data as of the end of July 2017. Reviewing second quarter mortgage origination volumes, Black Knight finds that while overall mortgage lending saw a 20 percent increase over Q1 2017, total volumes were down 16 percent from Q2 2016. Additionally, although purchase lending hit its highest level in 10 years, the total number of purchase mortgages being originated still falls far below pre-crisis (2000-2003) averages. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, more stringent credit requirements enacted in the wake of the Great Recession may be hampering purchase lending volumes.

 “We saw positive growth in lending in the second quarter, with $467 billion in first lien mortgages originated,” said Graboske. “While down 16 percent from a year ago, that marks a 20 percent increase in mortgage lending over Q1. Drilling down into the make-up of those originations, we see that refinance lending made up just 31 percent of all Q2 originations – the lowest such share in over 16 years. Refinance volumes were down as well, falling 20 percent from Q1, but that drop was more than offset by a 57 percent seasonal rise in purchase lending. Purchase originations totaled $321 billion in Q2 2017; up six percent from last year, and the highest quarterly volume since 2007. As a result of growing average loan amounts for purchase originations, the total dollar amount of purchase originations is higher than averages seen from 2000-2003, prior to both the peak in home prices and the Great Recession that followed. This is partly due to rising home prices, but also comes as a result of an all-but-total absence of second lien usage for purchases, a shift toward high-dollar/low-risk loans among non-agency lenders and a higher share of cash purchases at the lower end of the market.

“However, the number of purchase loans being originated still lags the pre-crisis average by almost 30 percent; while overall purchase origination volumes are strong from a total dollar amount perspective, the market still does not appear to be performing at peak capacity. One key cause is the more stringent purchase lending credit requirements enacted in response to the financial crisis. Consider that borrowers with credit scores of 720 or higher accounted for 74 percent of all Q2 2017 purchase loans as compared to a pre-crisis average of 47 percent. Today, there are 65 percent fewer purchase loans being originated to borrowers with credit scores below 720 than in those years. The lack of credit availability for those borrowers is causing a strong headwind for the purchase market. Using 2000-2003 averages as a measure, as many as 645,000 purchase loans were not originated in Q2 due to tighter lending standards. To put it another way, the purchase market is operating at less than two-thirds of peak capacity because of these factors.”
emphasis added

Click on graph for larger image.

This graphic from Black Knight compares the number, and balance, of mortgages impacted by hurricane Katrina in 2005, and hurricane Harvey in 2017.

From Black Knight:

• Though the situation around Hurricane Harvey continues to evolve, millions of Americans’ lives have been impacted by the storm and immense flooding

• The effects on mortgage performance may actually exceed those of Hurricane Katrina in 2005, both due to the magnitude of the rainfall as well as the population of the impacted area

• FEMA-designated disaster areas in southeast Texas associated with Hurricane Harvey have over twice as many mortgaged properties as Katrina’s FEMA-designated disaster areas, carrying nearly 4x the unpaid principal balance

There is much more in the mortgage monitor.

by Calculated Risk on 9/10/2017 08:09:00 PM

Weekend:
• Schedule for Week of Sept 10, 2017

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 6, and DOW futures are up 120 (fair value).

Oil prices were up over the last week with WTI futures at $47.65 per barrel and Brent at $53.94 per barrel.  A year ago, WTI was at $46, and Brent was at $48 - so oil prices are up year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.66 per gallon - up sharply due the Hurricane Harvey - a year ago prices were at $2.19 per gallon - so gasoline prices are up 47 cents per gallon year-over-year.

The increase in gasoline prices will push up inflation in September, but prices will probably decline back to pre-hurricane levels fairly quickly.

by Calculated Risk on 9/10/2017 09:32:00 AM

A few excerpts from a research note by Goldman Sachs economist Spencer Hill: Hurricane Handbook: Natural Disasters and Economic Data

• We find that major natural disasters are associated with a temporary slowdown in most major growth indicators. ... Modeling these effects, we estimate that hurricane-related disruptions could reduce 3Q GDP growth by as much as 1 percentage point. We believe the main channels for these GDP effects are consumption, inventories, housing, and the energy sector.

• We expect a meaningful drag on key growth indicators over the next two months, including a temporary drag on September payrolls growth of 20k—or as much as 100k if severe storm effects persist into next week (the payrolls reference period). We also expect a near-term boost to headline inflation (around 0.2pp on the yoy rate) due to higher gasoline prices ...

• Given potentially sizeable growth effects from Harvey—and with Irma risks now moving to center stage—we are lowering our Q3 GDP tracking estimate by 0.8pp to +2.0%. However, we expect this weakness to reverse over the subsequent three quarters, more than recouping the lost output.
emphasis added

CR Note: We've already seen a sharp increase in unemployment claims (as expected), and a drop in auto sales. Harvey and Irma will probably negatively impact other indicators for August and September. As Hill notes, we should see a sharp rebound later this year in many indicators.

by Calculated Risk on 9/09/2017 08:11:00 AM

The key economic reports this week are August retail sales and the Consumer Price Index (CPI).

For manufacturing, August industrial production, and the September New York Fed manufacturing survey, will be released this week.

----- Monday, Sept 11th -----
No major economic releases scheduled.

----- Tuesday, Sept 12th -----
6:00 AM ET: NFIB Small Business Optimism Index for August.

10:00 AM: Job Openings and Labor Turnover Survey for July from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in June to 6.163 million from 5.702 in May.  This was the highest number of job openings since this series started in December 2000.

The number of job openings (yellow) were up 11% year-over-year, and Quits were up 5% year-over-year.

----- Wednesday, Sept 13th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The Producer Price Index for August from the BLS. The consensus is a 0.13% increase in PPI, and a 0.2% increase in core PPI.

----- Thursday, Sept 14th -----
8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 300 thousand initial claims, up from 298 thousand the previous week.

8:30 AM: The Consumer Price Index for August from the BLS. The consensus is for a 0.4% increase in CPI, and a 0.2% increase in core CPI.

----- Friday, Sept 15th -----
8:30 AM ET: Retail sales for August be released.  The consensus is for a 0.1% increase in retail sales.

This graph shows retail sales since 1992 through July 2017.

8:30 AM: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of 19.0, down from 25.2.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for August.

This graph shows industrial production since 1967.

The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to increase to 76.8%.

10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for July.  The consensus is for a 0.2% increase in inventories.

10:00 AM: University of Michigan's Consumer sentiment index (preliminary for September). The consensus is for a reading of 96.0, down from 96.8 in August.

10:00 AM: Regional and State Employment and Unemployment (Monthly) for August 2017

by Calculated Risk on 9/08/2017 06:09:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Sept 8, 2017:

• Rig counts were off modestly this week

• Total US oil rigs were down 3 at 756

• Horizontal oil rigs were down 1 at 643
...
• Drilling Info rig counts are plateauing, still higher than Baker Hughes

• Texas – and Baker Hughes’ headquarters – faced challenging conditions this past week; numbers may be a bit more unreliable than usual.

Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

by Calculated Risk on 9/08/2017 02:25:00 PM

From Merrill Lynch:

Hurricane Harvey may end up being the most expensive natural disaster in history. We expect to see the impact of Harvey in upcoming economic releases, including jobless claims, manufacturing and consumer-related data. Factoring in Harvey, we take down our 3Q GDP tracker by 0.4pp to 2.5%. Hurricane Irma may be an additional drag.
emphasis added

From the Altanta Fed: GDPNow

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2017 is 3.0 percent on September 8, up from 2.9 percent on September 6. The forecast of the contribution of inventory investment to third-quarter real GDP growth increased from 0.87 percentage points to 0.94 percentage points after this morning's wholesale trade report from the U.S. Census Bureau.

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.1% for 2017:Q3 and 2.6% for 2017:Q4.

CR Note: Looks like real GDP growth will probably be in the 2s in Q3.

by Calculated Risk on 9/08/2017 11:31:00 AM

Note: Hotel occupancy rates increased noticeably following Hurricanes Katrina and Rita in 2005. I expect the overall occupancy rate will also increase following Hurricanes Harvey and Irma - and stay elevated for several months.

The hurricanes reduce supply (damaged hotels), and increase demand (damaged homes and apartments). This increases the overall occupancy rate. The impact from the hurricanes might even push 2017 to a new occupancy rate record.

From HotelNewsNow.com: STR: US hotel results for week ending 2 September

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 27 August through 2 September 2017, according to data from STR.

In comparison with the week of 28 August through 3 September 2016, the industry recorded the following:

• Occupancy: +2.2% to 65.9%
• Average daily rate (ADR): +2.1% to US$121.76
• Revenue per available room (RevPAR): +4.3% to US$80.22

Among the Top 25 Markets, Houston, Texas, reported the largest year-over-year increases in occupancy (+23.4% to 69.1%) and RevPAR (+29.8% to US$70.13). ADR in the market rose 5.2% to US$101.44. STR will release a detailed analysis on Hurricane Harvey’s impact on hotel performance early next week.
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 to date is slightly ahead of last year, and behind the record year in 2015.

Seasonally, the occupancy rate has peaked and will decline into the Fall.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 9/08/2017 09:28:00 AM

From Black Knight: Black Knight: Hurricane Harvey Could Result in 300,000 New Mortgage Delinquencies, with 160,000 Borrowers Becoming Seriously Past Due

• FEMA-designated disaster areas related to Hurricane Harvey are home to 1.18 million mortgaged properties

• Harvey-related disaster areas contain over twice as many mortgaged properties as those connected to Hurricane Katrina in 2005, carrying nearly four times the unpaid principal balance

• Post-Katrina mortgage delinquencies in Louisiana and Mississippi FEMA-designated disaster areas soared 25 percentage points, peaking at over 34 percent

• A similar impact to Harvey-related disaster areas would equate to 300,000 borrowers missing at least one mortgage payment, and 160,000 becoming 90 or more days past due

Today, the Data & Analytics division of Black Knight Financial Services, Inc. released an updated assessment of the potential mortgage-related impact from Hurricane Harvey. As Black Knight Data & Analytics Executive Vice President Ben Graboske explained, using post-Katrina Louisiana and Mississippi as benchmarks presents the possibility for significant rises in both early and long-term delinquencies.

 “Although the situation around Hurricane Harvey continues to evolve, millions of American lives have already been impacted by the storm and immense flooding,” said Graboske. “For many, their struggles are just beginning. Using post-Hurricane Katrina as a model, Black Knight has found that as many as 300,000 homeowners with mortgages in FEMA-designated Harvey disaster areas could become past due over the next few months. Post-Katrina, delinquencies spiked in Louisiana and Mississippi disaster areas, jumping 25 percent to peak at 34 percent of all mortgaged properties being past due. The serious delinquency rate – tracking mortgages 90 or more days past due, but not yet in foreclosure – rose to more than 16 percent. New Orleans was hardest hit, with its delinquency jumping by 46 percentage points to nearly 55 percent, and the serious delinquency rate increasing by 24 percent

by Calculated Risk on 9/07/2017 07:06:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Little-Changed at 2017 Lows

Mortgage rates didn't move much today, despite plenty of strength in underlying bond markets.  This would normally coincide with lower rates, so what's the deal?

The main issue is timing.  Bond markets weakened yesterday afternoon.  This would imply higher rates, but most lenders never went to the trouble of adjusting rate sheets intraday.  As I said yesterday, those lenders would begin today at a disadvantage.  Indeed they did, and that disadvantage was generally erased by the improvement in bond markets.  Thus, lenders who didn't move rates higher yesterday were able to keep today's rates relatively unchanged, thanks to bond market gains.  Lenders who DID raise rates yesterday were able to offer slightly lower rates today.

All in all, the average lender is quoting the lowest rates of 2017, with more than a few lenders at 3.75% on a top tier conventional 30yr fixed scenario.  Most lenders are able to quote 3.875% now, though a few remain at 4.0%.
emphasis added