by Calculated Risk on 4/19/2018 02:21:00 PM

From housing economist Tom Lawler: Early Read on Existing Home Sales in March

Based on publicly-available local realtor/MLS reports from across the country released through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.51 million in March, down 0.5% from February’s preliminary pace and down 2.8% from last March’s seasonally adjusted pace. Unadjusted sales should show a larger YOY decline, reflecting this March’s lower business day count relative to last March’s.

Local realtor/MLS data indicate that the inventory of existing homes for sale in March was down from a year ago but that the YOY decline in March was less than that in February, and I project that the NAR’s estimate of the number of existing homes for sale at the end of March was 1.67 million, up 5.0% from February’s preliminary estimate and down 7.2% from last March.

Finally, local realtor/MLS data suggest the median US existing single-family home sales price last month was up about 7.1% from last March. Note, however, that of late the NAR’s median existing home sales prices have shown lower YOY gains than local realtor/MLS data would have suggested, for reasons that are not clear.

CR Note: Existing home sales for March are scheduled to be released by the NAR on Monday.

by Calculated Risk on 4/19/2018 10:41:00 AM

From Black Knight: Black Knight’s First Look: Hurricane Impact Lingers, Drives Up Foreclosure Starts as Moratoria Lift; National Delinquencies Fall to 12-Month Low

• Seasonal effects and continued hurricane-related improvements contributed to a 13 percent decline in the national delinquency rate in March

• Nationally, there was a decline of 65,000 in serious delinquencies (90 or more days past due but not yet in foreclosure)

• Serious delinquencies attributable to Hurricanes Harvey and Irma saw a reduction of 19,500 loans

• However, as the hurricane impact shifts away from delinquencies, foreclosure starts rose by 12 percent

• More than two-thirds of that increase came from hurricane-affected areas of Texas and Florida

• Overall, active foreclosure inventory continues to improve, falling another 10,000 loans in March to its lowest level since late 2006

​• Despite interest rates remaining above 4.4 percent, prepayment activity in March increased by 22 percent from February’s 4-year low

According to Black Knight's First Look report for March, the percent of loans delinquent decreased 13.2% in March compared to February, but increased 3.1% year-over-year.

The percent of loans in the foreclosure process decreased 3.2% in March and were down 29.3% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 3.73% in March, down from 4.30% in February.

The percent of loans in the foreclosure process decreased in March to 0.63%.

The number of delinquent properties, but not in foreclosure, is up 81,000 properties year-over-year, and the number of properties in the foreclosure process is down 127,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Mar 2018	Feb 2018	Mar 2017	Mar 2016
Delinquent	3.73%	4.30%	3.62%	4.08%
In Foreclosure	0.63%	0.65%	0.88%	1.25%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	1,912,000	2,198,000	1,831,000	2,062,000
Number of properties in foreclosure pre-sale inventory:	321,000	331,000	448,000	631,000
Total Properties	2,232,000	2,528,000	2,279,000	2,693,000

by Calculated Risk on 4/19/2018 09:30:00 AM

From the Philly Fed: April 2018 Manufacturing Business Outlook Survey

Results from the April Manufacturing Business Outlook Survey suggest continued growth for the region’s manufacturing sector. Although the survey’s indexes for general activity and employment improved slightly, the indexes for new orders and shipments moderated. The firms also reported higher prices for both inputs and their own manufactured goods this month. The survey’s future indexes, measuring expectations for the next six months, reflected continued optimism.

The diffusion index for current general activity edged 1 point higher, from 22.3 in March to 23.2 this month ... The firms continued to report overall increases in employment. Over 31 percent of the responding firms reported increases in employment, while 4 percent reported decreases this month. The current employment index edged 2 points higher to 27.1, its highest reading in six months. The firms also reported a longer average workweek this month: The current average workweek index increased 9 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 April), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

This suggests the ISM manufacturing index will show solid expansion again in April, but perhaps lower than in March.

by Calculated Risk on 4/19/2018 08:33:00 AM

The DOL reported:

In the week ending April 14, the advance figure for seasonally adjusted initial claims was 232,000, a decrease of 1,000 from the previous week's unrevised level of 233,000. The 4-week moving average was 231,250, an increase of 1,250 from the previous week's unrevised average of 230,000.

Claims taking procedures in Puerto Rico and in the Virgin Islands have still not returned to normal.
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 increased to 231,250.

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

by Calculated Risk on 4/18/2018 05:28:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Inch Higher as Bonds Suggest More Trouble Ahead

Mortgage rates moved higher today as bond markets continued a mildly weaker trend for the month of April. Bonds (which underlie rates) are under pressure for a variety of reasons. The most notable headwinds are longer-term and bigger-picture. Rates responded to these headwinds in a fairly big way in Jan/Feb and have basically been "taking a break" since then.

Rates have moved very little during this "break," with most borrowers being quoted the same NOTE rate on any given day in the past 2 months. Upfront costs have been the only way the modulate the EFFECTIVE rate of the average lender's 30yr fixed quote. [30YR FIXED - 4.5%]
emphasis added

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 226 thousand initial claims, down from 233 thousand the previous week.

• At 8:30 AM, the Philly Fed manufacturing survey for April. The consensus is for a reading of 20.1, down from 22.3.

by Calculated Risk on 4/18/2018 02:31:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Dallas based on information collected on or before April 9, 2018."

Economic activity continued to expand at a modest to moderate pace across the 12 Federal Reserve Districts in March and early April. Outlooks remained positive, but contacts in various sectors including manufacturing, agriculture, and transportation expressed concern about the newly imposed and/or proposed tariffs. Consumer spending rose in most regions, with gains noted for nonauto retail sales and tourism, but mixed results for vehicle sales. Manufacturing activity grew moderately, and demand for nonfinancial services was mostly solid. Residential construction and real estate activity expanded further, although low home inventories continued to constrain sales in several Districts. Loan demand increased, and commercial real estate activity and construction improved since the last report. Transportation services activity expanded in over half of the reporting Districts, buoyed by increases in port traffic and/or air, rail and/or trucking shipments. Agricultural conditions were little changed or worsened on net, in part due to persistent drought conditions. Contacts in the energy sector cited a pickup in activity, except in the Richmond District, where coal production was flat and natural gas production dipped slightly.
...
Widespread employment growth continued, with most Districts characterizing growth as modest to moderate. Labor markets across the country remained tight, restraining job gains in some regions. Contacts continued to note difficulty finding qualified candidates across a broad array of industries and skill levels. Reports of labor shortages over the reporting period were most often cited in high-skill positions, including engineering, information technology, and health care, as well as in construction and transportation. Businesses were responding to labor shortages in a variety of ways, from raising pay to enhancing training to increasing their use of overtime and/or automation, among other strategies. Upward wage pressures persisted but generally did not escalate; most Districts reported wage growth as only modest.
emphasis added

by Calculated Risk on 4/18/2018 01:47:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

The graph below shows the year-over-year change for non-contingent inventory in Las Vegas and Sacramento (through March), and also Phoenix and total existing home inventory as reported by the NAR (both through February 2018).

Click on graph for larger image.

This shows the year-over-year change in inventory for Phoenix, Sacramento, and Las Vegas.  The black line if the year-over-year change in inventory as reported by the NAR.

Note that inventory in Sacramento was up 19% year-over-year in March (inventory still very low), and has increased year-over-year for six consecutive months. 

Also note the inventory is still down sharply in Las Vegas (red), but the YoY decline has been getting smaller.

I'll try to add a few other markets.

Inventory is a key for the housing market, and I will be watching inventory for the impact of the new tax law and higher mortgage rates on housing.

by Calculated Risk on 4/18/2018 10:31:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture billings remain positive in March

he American Institute of Architects (AIA) today reported that architecture firm billings rose for the sixth consecutive month in March, although the pace of growth slowed modestly from February.

Overall, the AIA’s Architecture Billings Index (ABI) score for March was 51.0 (any score over 50 indicates billings growth), which still reflects a healthy business environment. While business conditions softened somewhat at firms located in the Northeast region, billings remained strong at firms located in the South and West regions.

“New project activity coming into architecture firms continues to grow at a solid pace. As a result, project backlogs—in excess of six months at present— are at their highest post-recession level,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “Business remains strong in the South and West, and firms with a residential specialization continue to set the pace.”
...
• Regional averages: West (53.4), Midwest (50.7), South (53.2), Northeast (49.0)

• Sector index breakdown: multi-family residential (53.4), institutional (49.7), commercial/industrial (53.1), mixed practice (51.1)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 51.0 in March, down from 52.0 in February. Anything above 50 indicates expansion in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 11 of the last 12 months, suggesting a further increase in CRE investment in 2018.

by Calculated Risk on 4/18/2018 07:00:00 AM

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

Mortgage applications increased 4.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 13, 2018.

... The Refinance Index increased 4 percent from the previous week. The seasonally adjusted Purchase Index increased 6 percent from one week earlier. The unadjusted Purchase Index increased 7 percent compared with the previous week and was 10 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) remained unchanged at 4.66 percent, with points unchanged at 0.46 (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 50 bps or more from the recent level.



The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 10% year-over-year.

by Calculated Risk on 4/17/2018 07:23:00 PM

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

• During the day: The AIA's Architecture Billings Index for March (a leading indicator for commercial real estate).

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.