by Calculated Risk on 11/30/2017 07:47:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Hit 1-Month Highs

Mortgage rates actually continued higher today at the same quicker pace seen yesterday. Due to the relatively narrow range during November, rates are now in line with their highest levels in more than a month whereas they were at 2-week lows just 2 days ago. The average lender is now quoting conventional 30yr fixed rates of 4.0% on top tier scenarios, with a few outliers at 3.875% and 4.125%. A few days ago, 3.875% was nearly as prevalent.

Tuesday:
• At 10:00 AM ET, ISM Manufacturing Index for November. The consensus is for the ISM to be at 58.4, down from 58.7 in October. In October, the employment index was at 59.8%, and the new orders index was at 63.4%.

• Also at 10:00 AM, Construction Spending for October. The consensus is for a 0.5% increase in construction spending.

• All day, Light vehicle sales for November. The consensus is for light vehicle sales to be 17.6 million SAAR in November, down from 18.0 million in October (Seasonally Adjusted Annual Rate).

by Calculated Risk on 11/30/2017 04:18:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate was unchanged at 1.01% in October, from 1.01% in September. The serious delinquency rate is down from 1.21% in October 2016.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (4% of portfolio), 2.82% are seriously delinquent. For loans made in 2005 through 2008 (7% of portfolio), 5.91% are seriously delinquent, For recent loans, originated in 2009 through 2017 (89% of portfolio), only 0.33% are seriously delinquent. So Fannie is still working through poor performing loans from the bubble years.

In the short term - over the next couple of months - the delinquency rate will probably increase slightly due to the hurricanes.  After the hurricane bump, maybe the rate will decline another 0.3 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Freddie Mac reported earlier.

by Calculated Risk on 11/30/2017 02:28:00 PM

Earlier from the Chicago PMI: Chicago Business Barometer Softens to 63.9 in November

The MNI Chicago Business Barometer eased to 63.9 in November, down from 66.2 in October, to stand at the lowest level in three months.

Despite receding from October’s six-and-a-half year high, optimism among businesses recorded the fourth highest outturn this year. The Barometer has expanded for 21 straight months and is poised to see out 2017 in solid fashion.
...
“Despite November’s fall, the MNI Chicago Business Barometer remains on track to deliver the first full year of expansion in three years. Firms seem to have navigated through the worst of the bad weather conditions in recent months, though supplier deliveries rising to a thirteen-year high and persistent, high input costs suggests the effects are yet to fully dissipate away,” said Jamie Satchi, Economist at MNI Indicators.
emphasis added

This was close to the consensus forecast of 64.0, and still a solid reading.

by Calculated Risk on 11/30/2017 11:49:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 25 November

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 19-25 November 2017, according to data from STR.

In comparison with the week of 20-26 November 2016, the industry recorded the following:

• Occupancy: +1.4% to 51.4%
• Average daily rate (ADR): +2.0% to US$109.99
• Revenue per available room (RevPAR): +3.4% to US$56.52

Among the Top 25 Markets, Houston, Texas, reported the largest increase in all three key performance metrics: occupancy (+32.8% to 56.0%), ADR (+16.0% to US$92.58) and RevPAR (+54.1% to US$51.86).
emphasis added

Note: The hurricanes continue to drive demand in Texas and Florida, especially in Houston.

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 ahead of the record year in 2015.  The hurricanes will push the annual occupancy rate to a new record in 2017.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 11/30/2017 08:48:00 AM

The BEA released the Personal Income and Outlays report for October:

Personal income increased $65.1 billion (0.4 percent) in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $66.1 billion (0.5 percent) and personal consumption expenditures (PCE) increased $34.4 billion (0.3 percent).
...
Real DPI increased 0.3 percent in October and Real PCE increased 0.1 percent. The PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

The October PCE price index increased 1.6 percent year-over-year and the October PCE price index, excluding food and energy, increased 1.4 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through October 2017 (2009 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

The increase in personal income was slightly above expectations,  and the increase in PCE was at expectations.

by Calculated Risk on 11/30/2017 08:33:00 AM

The DOL reported:

In the week ending November 25, the advance figure for seasonally adjusted initial claims was 238,000, a decrease of 2,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 239,000 to 240,000. The 4-week moving average was 242,250, an increase of 2,250 from the previous week's revised average. The previous week's average was revised up by 250 from 239,750 to 240,000.

Claims taking procedures continue to be disrupted in the Virgin Islands
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 increased to 242,250.

This was slightly lower than the consensus forecast. The low level of claims suggest relatively few layoffs.

by Calculated Risk on 11/29/2017 08:55:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 240 thousand initial claims, up from 239 thousand the previous week.

• Also at 8:30 AM, Personal Income and Outlays for October. The consensus is for a 0.3% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.2%.

• At 9:45 AM, Chicago Purchasing Managers Index for November. The consensus is for a reading of 64.0, down from 66.2 in October.

by Calculated Risk on 11/29/2017 06:27:00 PM

Over the last 20 years or so, we've seen several policy mistakes. The worst, of course, was the decision to invade Iraq (I opposed the Iraq war, and was shouted down and called names like "Saddam lover" for questioning the veracity of the information). Note: I started this blog in January 2005, and one of my earliest non-housing posts was "A Desolation called Peace" (I'm still angry).

From an economic perspective, the errors include the failure to properly regulate the banks and mortgage lenders, the Bush tax cuts, the original TARP proposal, and some minor mistakes in 2009 like the homebuyers tax credit and "cash-for-clunkers". Also the premature pivot to austerity in 2010, and the failure to pass infrastructure spending programs in the following years, were clear policy mistakes.

We'd better off if we hadn't made these mistakes, but we survived.

The current tax cut bill is another clear policy mistake.

First, if we look at the business cycle and the deficit, economic theory suggests that the government should increase the deficit during economic downturns, and work down the deficit during expansions.  The economy is currently in the mid-to-late stage of a recovery, so decreasing the deficit makes sense now - not increasing the deficit.

Are there any fiscal conservatives left in the GOP?  There are definitely no deficit hawks!

Also, a key problem in the US is income and wealth inequality.   How does this bill address these issues?   It does the opposite.

 Oh well, it looks like the US is about to make another policy mistake that will have to be reversed in a few years.

by Calculated Risk on 11/29/2017 12:43:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in October was at 0.86%, unchanged from 0.86% in September.  Freddie's rate is down from 1.03% in October 2016.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

Click on graph for larger image

The recent slight increase in the delinquency rate was probably due to the hurricanes - and we might see a further increase over the next couple of months (These are serious delinquencies).

After the hurricane bump, maybe the rate will decline another 0.2 to 0.3 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report for October soon.

by Calculated Risk on 11/29/2017 10:07:00 AM

From the NAR: Pending Home Sales Strengthen 3.5 Percent in October

Pending home sales rebounded strongly in October following three straight months of diminishing activity, but still continued their recent slide of falling behind year ago levels, according to the National Association of Realtors®. All major regions except for the West saw an increase in contract signings last month.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 3.5 percent to 109.3 in October from a downwardly revised 105.6 in September. The index is now at its highest reading since June (110.0), but is still 0.6 percent below a year ago.
...
The PHSI in the Northeast inched forward 0.5 percent to 95.0 in October, but is still 1.9 percent below a year ago. In the Midwest the index increased 2.8 percent to 105.8 in October, but remains 0.9 percent lower than October 2016.

Pending home sales in the South jumped 7.4 percent to an index of 123.6 in October and are now 2.0 percent higher than last October. The index in the West decreased 0.7 percent in October to 101.6, and is now 4.4 percent below a year ago.
emphasis added

This was above expectations of a 1.0% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in November and December.