by Calculated Risk on 3/16/2018 08:38:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in February were at a seasonally adjusted annual rate of 1,236,000. This is 7.0 percent below the revised January estimate of 1,329,000 and is 4.0 percent below the February 2017 rate of 1,288,000. Single-family housing starts in February were at a rate of 902,000; this is 2.9 percent above the revised January figure of 877,000. The February rate for units in buildings with five units or more was 317,000.

Building Permits:
Privately-owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,298,000. This is 5.7 percent below the revised January rate of 1,377,000, but is 6.5 percent above the February 2017 rate of 1,219,000. Single-family authorizations in February were at a rate of 872,000; this is 0.6 percent below the revised January figure of 877,000. Authorizations of units in buildings with five units or more were at a rate of 385,000 in February.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased sharply in February compared to January.   Multi-family starts were down 18.7% year-over-year in February.

Multi-family is volatile month-to-month, but has been mostly moving sideways the last few years.

Single-family starts (blue) increased in February, and are up 2.9% year-over-year.

The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically fairly low).

Total housing starts in February were below expectations, mostly due to a sharp decrease in multi-family starts (the reverse of January).  Starts for December and January were revised slightly.

I'll have more later ...

by Calculated Risk on 3/15/2018 07:12:00 PM

Cardiff Garcia interviewed me at NPR Planet Money: Calculated Risk, Calculated Caution. This was related to my post two weeks ago: When the Story Changes, Be Alert. Thanks to Cardiff for having me on!

Friday:
• At 8:30 AM ET, Housing Starts for February. The consensus is for 1.284 million SAAR, down from 1.326 million SAAR.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for February. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 77.7%.

• At 10:00 AM, Job Openings and Labor Turnover Survey for January from the BLS. Jobs openings decreased in December to 5.811 million from 5.978 in November. The number of job openings were up 4.9% year-over-year, and Quits were up 5.6% year-over-year.

• Also at 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for March). The consensus is for a reading of 98.5, down from 99.7.

by Calculated Risk on 3/15/2018 04:22:00 PM

CR Note: A key takeaway from this excellent analysis by Tom Lawler is that annual household growth will be much lower than previously expected.

From housing economist Tom Lawler: Census: New Long-Term Population Projections Show Slower Growth than Previous Projections but Are Still Too High; Projections Overstate Growth in all Age Groups Save the Very Young and the Very Old

This week the Census Bureau released new projections of the US population, and to the surprise of no one reading this report the new projections show substantially slower population growth than the last set of projections, released at the end of 2014. Virtually all of the slower projected population growth stemmed from a sharp decline in projected net international migration. The new projections show average annual growth in the total US population from 2017 to 2020 (I’m only focusing on the short-term projections) of 2.355 million (compound annual growth rate (CAGR) of 0.72%), down by 271 thousand from the 2.626 million annual projected increase (CAGR of 0.80%) in the 2014 population projections. The latest projection shows average annual Net International Migration (NIM) from July 1, 2017 to July 1, 2020 of 1.006 million, compared to the unrealistically high 1.267 million per year in the 2014 projection. This reduced forecast for NIM reflected recent trends, and did not reflect any possible policy changes.

One of the biggest surprises to folks who follow various demographic data was the projection for deaths in the latest Census report. While data on deaths from the National Center for Health Statistics (NCHS) showed SIZABLE increases in US deaths and death rates over the past few years – with alarmingly increases in death rates for the 15-44 year old age groups – the latest Census projections showed almost no increase in projected US deaths from 7/1/2017 to 7/1/2020 (2.745 million per year in the latest projections vs. 2.721 in the 2014 projections). Provisional data from the NCHS show that US “age-adjusted” death rates continued to increase last year, and these provisional data suggest that US death on the 12 month period ending last June were a staggering 97 thousand higher than those shown in the latest projections.

Before analysts start plugging these new population projections – especially with respect to age – into their various models, they should look at the key assumptions about the components of change that drive these projections, which are deaths, births, and net international migration, to assess whether they seem “reasonable.: These assumptions are available by age and ethnicity in the “datasets” on the Census Population Projections website. With respect to deaths, it is quite clear that the latest Census population projections do not pass the “sniff test” for reasonableness.

Below is a table comparing the Census 2017 Population Projections’ (C2017) assumptions about deaths for selected age groups for the 12-month period ending June 30, 2017 compared to the National Center for Health Statistics tally of US deaths for 2016 (calendar year).

Age Group	Census 2017 Projections 7/1/16-6/30/17	NCHS 2016 (Calendar Year)	Difference
<1	39,741	23,161	16,580
1-4	8,482	4,045	4,437
5-9	2,422	2,490	-68
10-14	2,883	3,013	-130
15-24	23,543	32,575	-9,032
25-34	43,981	57,616	-13,635
35-44	62,599	77,792	-15,193
45-54	151,976	173,516	-21,540
55-64	330,420	366,445	-36,025
65-74	493,422	512,080	-18,658
75-84	619,610	636,916	-17,306
85+	909,723	854,462	55,261
N/A		137	-137
Total	2,688,802	2,744,248	-55,446

A few things jump out from this table. First, the Census 2017 Projections (C2017) show a massively larger (and unrealistically high) number of “new-born” infant deaths than that compiled by the NCHS. I pointed this out to Census analysts, and they are aware of this “issue.” (I actually sent the Population Division this table.). Second, the C2017 assumptions show a massively smaller number of deaths for the 15-84 year age groups combined than does the NCHS, with especially large % differences for the 15-44 year age groups. And finally, the C2017 assumptions show significantly more deaths for the very elderly than does the NCHS.

As I showed in an earlier report, death rates as compiled by the NCHS increased sharply in the 15-44 year old age groups over the past several years, and I have no clue why the C2017 projections do not incorporate this increase. Moreover, the C2017 projections assume that death rates for these age groups will decline from the “too low” 2017 levels over the forecast period.

If in fact death rates remain near recent levels – or even if they gradually reverted to 2014 levels – the number of deaths in these age groups would be massively higher than those shown in the C2017 projection, which the number of deaths of the very elderly (85+ years) would be lower (aggregate death would be higher).

What this means, of course, is that if one were to incorporate the higher “actual” death rates the US has recently experienced into population projections over the next several years, the result would be substantially lower projections in the size of the “working age” population and somewhat higher projection for the very elderly and very young.

To give one an idea of how important death rate assumptions are to the near-term population outlook, below is a table of what the C2017 population projections might be if death rates by age were similar to what was experienced. I kept the net immigration assumptions by age from C2017, though are issues with these as well (that’ll be later). I also show the population projections from C2014. (Note: the starting point for C2017 was “Vintage 2016,” and population estimates were revised upward slightly in “Vintage 2017,” which will also be subject to revision next year. Also, note population numbers are as of July 1.)

Census 2014 Population Projections (000s)
	2016	2017	2018	2019	2020	2016-2020
Total	323,996	326,626	329,256	331,884	334,503	10,508
0-14	61,037	61,176	61,314	61,435	61,577	539
15-24	43,613	43,352	43,202	43,125	43,107	-506
25-34	44,865	45,490	46,018	46,561	46,890	2,025
35-44	40,578	40,930	41,477	42,035	42,628	2,050
45-54	42,864	42,443	41,860	41,239	40,842	-2,022
55-64	41,619	42,180	42,619	42,931	43,019	1,401
65-74	28,747	29,825	30,743	31,860	33,075	4,328
75-84	14,267	14,739	15,461	16,083	16,639	2,373
85+	6,407	6,491	6,562	6,615	6,727	320
25-54	128,306	128,863	129,356	129,836	130,360	2,053

Census 2017 Population Projections (000s)
	2016	2017	2018	2019	2020	2016-2020
Total	323,128	325,489	327,849	330,205	332,555	9,427
0-14	60,975	61,071	61,162	61,235	61,325	350
15-24	43,511	43,222	43,051	42,962	42,938	-573
25-34	44,677	45,253	45,727	46,216	46,491	1,814
35-44	40,470	40,781	41,286	41,802	42,352	1,882
45-54	42,787	42,329	41,710	41,051	40,615	-2,172
55-64	41,463	42,002	42,421	42,714	42,783	1,319
65-74	28,630	29,668	30,547	31,620	32,789	4,159
75-84	14,234	14,697	15,406	16,015	16,561	2,328
85+	6,380	6,468	6,539	6,590	6,701	321
25-54	127,934	128,363	128,723	129,068	129,458	1,524

Updated Projections Assuming 2016 NCHS Death Rates, C2017 NIM (000s)
	2016	2017	2018	2019	2020	2016-2020
Total	323,128	325,438	327,703	329,920	332,090	8,962
0-14	60,975	61,091	61,202	61,294	61,402	427
15-24	43,511	43,213	43,034	42,938	42,907	-604
25-34	44,677	45,239	45,699	46,173	46,431	1,754
35-44	40,470	40,766	41,256	41,755	42,287	1,817
45-54	42,787	42,309	41,666	40,981	40,520	-2,267
55-64	41,463	41,967	42,342	42,585	42,594	1,131
65-74	28,630	29,649	30,492	31,540	32,669	4,039
75-84	14,234	14,681	15,380	15,959	16,455	2,222
85+	6,380	6,523	6,631	6,696	6,824	444
25-54	127,934	128,314	128,621	128,908	129,238	1,303

Census’ 2014 Projections, total population from 2016 to 2020 was forecast to rise by 10.508 million, compared to 9.427 million in the latest projection and 8.962 million if the latest projection held 2016 NCHS death rates constant. The so-called “prime-age” working population was project to rise by 2.053 million in C2014 Projections, compared to 1.524 million in the C2017 Projection and 1.303 million if the C2017 has assumed constant 2016 death rates.

Annual Growth Rate, 25-54 Year Old Population
	C2014	C2017	Adjusted C2017 *
2017	0.43%	0.34%	0.30%
2018	0.38%	0.28%	0.24%
2019	0.37%	0.27%	0.22%
2020	0.40%	0.30%	0.26%
CAGR, 2016-2020	0.40%	0.30%	0.25%
*Assumes 2016 NCHS Death Rates

Obviously, an updated population projection from those from 2014 produces slower projections for labor force growth, and significantly slower if one uses “realistic” growth rates. Similarly, household projections using 2014 projections are a LOT higher than those using updated assumptions and realistic death rates. E.g., from mid-2018 to mid-2020 a reasonable projection for annual household growth using the 2014 population projections of about 1.455 million. Using the “raw” 2017 projections would, using similar headship rates, produce an annual household growth forecast of about 1.345 million. Adjusting the 2017 projections for more realistic death rates, however, would (using same headship rates) result in an annual household growth forecast over the next two years of about 1.245 million, or about 210,000 a year less than one would get using the old C2014 projections.

I’ll have more on the topic of population projections later.

by Calculated Risk on 3/15/2018 12:54:00 PM

From CoreLogic: Homeowner Equity Q4 2017

CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63 percent of all properties) have seen their equity increase by a total of $908.4 billion since the fourth quarter 2016, an increase of 12.2 percent, year over year.

In the fourth quarter 2017, the total number of mortgaged residential properties with negative equity decreased 1 percent from the third quarter 2017 to 2.5 million homes, or 4.9 percent of all mortgaged properties. Compared to the fourth quarter 2016, negative equity decreased 21percent from 3.2 million homes, or 6.3 percent of all mortgaged properties.
...
Negative equity peaked at 26 percent of mortgaged residential properties in the fourth quarter of 2009, based on the CoreLogic equity data analysis which began in the third quarter of 2009.
emphasis added

CR Note: A year ago, in Q4 2016, there were 3.2 million properties with negative equity - now there are 2.5 million.  A significant change.

by Calculated Risk on 3/15/2018 11:19:00 AM

Earlier from the NY Fed: Empire State Manufacturing Survey

Business activity grew robustly in New York State, according to firms responding to the March 2018 Empire State Manufacturing Survey. The headline general business conditions index climbed nine points to 22.5. The new orders index rose to 16.8 and the shipments index advanced to 27.0—readings that pointed to strong growth in orders and shipments. Unfilled orders increased, delivery times lengthened, and inventories edged higher. Labor market indicators showed an increase in employment and hours worked. After reaching a multiyear high last month, the prices paid index moved up further, reflecting ongoing and widespread increases in input prices. The prices received index held steady and suggested moderate selling price increases. Firms remained optimistic about future business conditions, though less so than last month, and capital spending plans remained strong.

And from the Philly Fed: March 2018 Manufacturing Business Outlook Survey

Results from the March Manufacturing Business Outlook Survey suggest continued growth for the region’s manufacturing sector. ... The diffusion index for current general activity remained positive but declined, from 25.8 in February to 22.3 this month ... The firms continued to report increases in employment. Nearly 35 percent of the responding firms reported increases in employment, while 9 percent reported decreases this month. The current employment index edged slightly higher to 25.6, its highest reading in five 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 March), and five Fed surveys are averaged (blue, through February) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through February (right axis).

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

by Calculated Risk on 3/15/2018 10:06:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 70 in March, down from 71 in February. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Remains on Solid Footing in March

Builder confidence in the market for newly-built single-family homes edged down one point to a level of 70 in March from a downwardly revised February reading on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) but remains in strong territory.

“Builders’ optimism continues to be fueled by growing consumer demand for housing and confidence in the market,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, builders are reporting challenges in finding buildable lots, which could limit their ability to meet this demand.”

“A strong labor market, rising incomes and a growing economy are boosting demand for homeownership even as interest rates rise,” said NAHB Chief Economist Robert Dietz. “With these economic fundamentals in place, the single-family sector should continue to make gains at a gradual pace in the months ahead.”
...
The HMI component gauging current sales conditions held steady at 77, the chart measuring sales expectations in the next six months dropped two points to 78, and the index gauging buyer traffic fell three points to 51.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57, the South decreased one point to 73, the West fell two points to 79, and the Midwest dropped four points to 68.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was close to the consensus forecast, and another solid reading.

by Calculated Risk on 3/15/2018 08:33:00 AM

The DOL reported:

In the week ending March 10, the advance figure for seasonally adjusted initial claims was 226,000, a decrease of 4,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 231,000 to 230,000. The 4-week moving average was 221,500, a decrease of 750 from the previous week's revised average. The previous week's average was revised down by 250 from 222,500 to 222,250.

Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.
emphasis added

The previous week was revised down.

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 221,500.

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

by Calculated Risk on 3/14/2018 08:33:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, down from 231 thousand the previous week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for March. The consensus is for a reading of 23.3, down from 25.8.

• Also at 8:30 AM, The New York Fed Empire State manufacturing survey for March. The consensus is for a reading of 14.6, up from 13.1.

• At 10:00 AM, The March NAHB homebuilder survey. The consensus is for a reading of  72, unchanged from 72 in February. Any number above 50 indicates that more builders view sales conditions as good than poor.

by Calculated Risk on 3/14/2018 04:41:00 PM

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

Mortgage rates fell again today as several economic updates painted a slightly gloomier picture. In general, weaker economic data coincides with lower rates. First up were Retail Sales numbers, which moved into negative territory in February. Analysts expected a modest improvement. Later in the morning, several widely-followed sources of GDP tracking adjusted Q1 estimates significantly lower. For instance, the Federal Reserve Bank of Atlanta keeps a running tally of where GDP would come out today given the incoming data. Today's reading fell to 1.9% from 2.5% last week.
...
The average borrower is likely to see the same interest rate at the top of the page (i.e. same NOTE rate) but with slightly lower upfront costs today (i.e. lower EFFECTIVE rate). With these gains, the average lender has inched down to the same rates seen on March 1st. [30YR FIXED - 4.5-4.625%]
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates

by Calculated Risk on 3/14/2018 11:15:00 AM

From the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 1.9 percent on March 14, down from 2.5 percent on March 9. After yesterday's Consumer Price Index release from the U.S. Bureau of Labor Statistics and this morning's retail sales report from the U.S. Census Bureau, the nowcast of first-quarter real personal consumption expenditures growth fell from 2.2 percent to 1.4 percent.