by Calculated Risk on 5/18/2018 05:17:00 PM

From housing economist Tom Lawler: FHA: Volumes Down, New Book Risk Rises

FHA reported that single-family purchase mortgage endorsements in the first (calendar) quarter of 2018 totaled 166,642, down 14.8% from the comparable quarter of 2017. FHA single-family purchase applications last quarter were down 12.2% from a year earlier.

The average credit score of FHA purchase mortgage endorsements last quarter was 672, the lowest quarter average since 2008. The average debt-to-income (DTI) ratio of FHA purchase mortgage endorsements last quarter was 43.02, the highest level since at least 2008 (I only have data going back to 2008). While FHA does not show the distribution of DTI’s in its public reports, in written testimony said that in February that almost 25% of FHA single-family mortgage endorsements had DTIs above 25%.

Click on graph for larger image.

CR Note: These three graphs are from Tom Lawler.

The first graph shows FHA single family purchase and applications and endorsements. FHA volumes are down recently (and according to the MBA, the FHA receives about 10% of all mortgage applications).

The second graphs shows the average credit score of borrows who receive FHA Purchase mortgage endorsements.

Lending standards were tightened after the housing bubble, but have been slowly slipping.

As Lawler noted "The average credit score of FHA purchase mortgage endorsements last quarter was 672, the lowest quarter average since 2008."

The third graph shows the average debt-to-income (DTI) ratio for borrowers who receive an FHA endorsement.

The average ratio has increased significantly over the last couple of years.

Looser standards (lower credit scores, higher DRI) means more risk. This isn't too concerning; it is only 10% of the mortgage markets. However further declines in the average credit score - and / or increases in the DTI - would be a little worrisome.

by Calculated Risk on 5/18/2018 01:56:00 PM

From housing economist Tom Lawler: CAR: California Existing Single-Family Home Inventory Shows First YOY Gain in a Long While

From the California Association of Realtors monthly home sales report for April:

“Statewide active listings (of existing single-family homes) finally reversed nearly three years of decreases after rising 1.9% (YOY) in April.”

CR Note: Here is a table from housing economist Tom Lawler showing the year-over-year (YoY) change for National inventory from the NAR, and the YoY change for California from the CAR.

It appears the YoY declines are slowing nationally, and inventory has started to increase YoY in California.

YOY % Change, Existing SF Homes for Sale
	NAR (National)	CAR (California)
Sep-17	-8.4%	-11.2%
Oct-17	-10.4%	-11.5%
Nov-17	-9.7%	-11.5%
Dec-17	-11.5%	-12.0%
Jan-18	-9.5%	-6.6%
Feb-18	-8.6%	-1.3%
Mar-18	-7.2%	-1.0%
Apr-18	-5.7%1	1.9%
1Estimate by Tom Lawler based on local reports.

by Calculated Risk on 5/18/2018 11:44:00 AM

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

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 5.48 million in April, down 2.1% from March’s preliminary pace and down 1.1% from last April’s seasonally adjusted pace. Unadjusted sales should show a YOY gain, with the SA/NSA difference reflecting this April’s higher business day count relative to last April’s.

Local realtor/MLS data, as well as tracking sources, indicate that the inventory of existing homes for sale in April was down from a year ago but that the YOY decline in April was less than that in March. I project that the NAR’s estimate of the number of existing homes for sale at the end of April will be 1.81 million, up 8.4% from March’s preliminary estimate and down 5.7% from last April.

Finally, local realtor/MLS data suggest the median US existing single-family home sales price last month was up about 7.0% from last April. 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 April are scheduled to be released by the NAR on Thursday, May 24th. The early consensus is the NAR will report sales of 5.57 Million SAAR.

by Calculated Risk on 5/18/2018 10:06:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in April in 4 states and stable in 46 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Twelve states had jobless rate decreases from a year earlier and 38 states and the District had little or no change. The national unemployment rate edged down from March to 3.9 percent and was 0.5 percentage point lower than in April 2017
...
Hawaii had the lowest unemployment rate in April, 2.0 percent. The rates in California (4.2 percent), Hawaii (2.0 percent), and Wisconsin (2.8 percent) set new series lows. (All state series begin in 1976.) Alaska had the highest jobless rate, 7.3 percent.
emphasis added

Click on graph for larger image.

This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently only one state, Alaska, has an unemployment rate at or above 7% (light blue); And only Alaska is above 6% (dark blue).

by Calculated Risk on 5/17/2018 07:12:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 12 May

The U.S. hotel industry reported positive year-over-year results in the three key performance metrics during the week of 6-12 May 2018, according to data from STR.

In comparison with the week of 7-13 May 2017, the industry recorded the following:

• Occupancy: +0.8% to 68.5%
• Average daily rate (ADR): +3.5% to US$130.06
• evenue per available room (RevPAR): +4.4% to US$89.03
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2018, dash light blue is 2017 (record year due to hurricanes), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

The occupancy rate, to date, is slightly ahead of the record year in 2017 (2017 finished strong due to the impact of the hurricanes).

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 5/17/2018 03:16:00 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, Phoenix and Sacramento (all through April), and also total existing home inventory as reported by the NAR (through March 2018).

Note: For Phoenix, there was a discrepancy between the "Market Report" and the "Stats Report".  For this graph, I'm using the Stats Report.

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 18% year-over-year in April (inventory was still very low), and has increased year-over-year for seven consecutive months. 

Also note the inventory is still down 19.5% in Las Vegas (red), but the YoY decline has been getting smaller - and it is very possible that inventory will up year-over-year in Las Vegas later this year.

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.  It appears the inventory decline might be ending in some markets.

by Calculated Risk on 5/17/2018 01:12:00 PM

From the Philly Fed: May 2018 Manufacturing Business Outlook Survey

Results from the May Manufacturing Business Outlook Survey suggest a pickup in growth of the region’s manufacturing sector. The survey’s indexes for general activity, new orders, shipments, and employment increased from their readings in April. A notable share of firms also reported higher prices for 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 increased 11 points, from 23.2 in April to 34.4 this month. Over 43 percent of the manufacturers reported increases in overall activity this month, while 9 percent reported decreases. ... The firms continued to report overall increases in employment. Nearly 37 percent of the responding firms reported increases in employment, while 6 percent reported decreases this month. The current employment index edged 3 points higher to 30.2, its highest reading in seven 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 May), and five Fed surveys are averaged (blue, through April) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through April (right axis).

This suggests the ISM manufacturing index will show solid expansion again in May, and probably stronger than in April.

by Calculated Risk on 5/17/2018 10:43:00 AM

From the NY Fed: Total Household Debt Rises for 15th Straight Quarter, Led by Mortgages, Student Loans

The Federal Reserve Bank of New York’s Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit, which shows that total household debt increased by $63 billion (0.5%) to $13.21 trillion in the first quarter of 2018. It was the 15th consecutive quarter with an increase, and the total is now $536 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Further, overall household debt is now 18.5% above the post-financial-crisis trough reached during the second quarter of 2013. The Report is based on data from the New York Fed's Consumer Credit Panel, a nationally representative sample of individual- and household-level debt and credit records drawn from anonymized Equifax credit data.

Mortgage balances—the largest component of household debt—rose by $57 billion during the first quarter, to $8.94 trillion. Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $8 billion, to $436 billion. The median credit score of newly originating mortgage borrowers increased from 755 to 761.

"While housing wealth is at an all-time high, it has shifted into the hands of older and more creditworthy borrowers, in part because of tight mortgage lending standards," said Andrew Haughwout, senior vice president at the New York Fed. "An increased amount of available home equity should make the household balance sheet more resilient in the event of a financial shock, though that may not be an option for lower-credit-score borrowers."
emphasis added

Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q1.  Household debt previously peaked in 2008, and bottomed in Q2 2013.

From the NY Fed:

Aggregate household debt balances increased in the first quarter of 2018, for the 15th consecutive quarter, and are now $536 billion higher than the previous (2008Q3) peak of $12.68 trillion. As of March 31, 2018, total household indebtedness was $13.21 trillion, a $63 billion (0.5%) increase from the fourth quarter of 2017. Overall household debt is now 18.5% above the 2013Q2 trough.

Mortgage balances, the largest component of household debt, increased somewhat during the first quarter. Mortgage balances shown on consumer credit reports on March 31 stood at $8.94 trillion, an increase of $57 billion from the fourth quarter of 2017. Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $8 billion, and are now at $436 billion. Non-housing balances saw a $14 billion increase in the first quarter. Auto loans grew by $8 billion. Student loan balances increased by $29 billion and credit cards declined by $19 billion.

The second graph shows the percent of debt in delinquency. There is still a larger than normal percent of debt 90+ days delinquent (Yellow, orange and red).

The overall delinquency rate decreased in Q1.  From the NY Fed:

Aggregate delinquency rates improved in the first quarter of 2018. As of March 31, 4.6% of outstanding debt was in some stage of delinquency. Of the $605 billion of debt that is delinquent, $407 billion is seriously delinquent (at least 90 days late or “severely derogatory”). The flow into 90+ day delinquency for credit card balances has been increasing notably for the last year, while the flow into 90+ day delinquency for auto loan balances has been slowly trending upward since 2012.

About 192,000 consumers had a bankruptcy notation added to their credit reports in 2018Q1, the lowest observed in the 19 year history of the data.

There is much more in the report.

by Calculated Risk on 5/17/2018 08:33:00 AM

The DOL reported:

In the week ending May 12, the advance figure for seasonally adjusted initial claims was 222,000, an increase of 11,000 from the previous week's unrevised level of 211,000. The 4-week moving average was 213,250, a decrease of 2,750 from the previous week's unrevised average of 216,000. This is the lowest level for this average since December 13, 1969 when it was 210,750.

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 decreased to 213,250.

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

by Calculated Risk on 5/16/2018 06:51:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 217 thousand initial claims, up from 211 thousand the previous week.

• At 8:30 AM, the Philly Fed manufacturing survey for May. The consensus is for a reading of 22.0, down from 23.2.

• At 11:00 AM, The New York Fed will release their Q1 2018 Household Debt and Credit Report