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Wednesday, August 15, 2018

NAHB: Builder Confidence declines to 67 in August

by Calculated Risk on 8/15/2018 10:07:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 67 in August, down from 68 in July. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Remains Firm in August

Builder confidence in the market for newly-built single-family homes edged down one point to a solid 67 reading in August on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“The good news is that builders continue to report strong demand for new housing, fueled by steady job and income growth along with rising household formations,” said NAHB Chairman Randy Noel, a custom home builder from LaPlace, La. “However, they are increasingly focused on growing affordability concerns, stemming from rising construction costs, shortages of skilled labor and a dearth of buildable lots.”

“The solid economic expansion and firm job market should spur demand for new single-family homes in the months ahead,” said NAHB Chief Economist Robert Dietz. “Meanwhile, builders continue to monitor how tariffs and the growing threat of a trade war are affecting key building material prices, including lumber. These cost increases, coupled with rising interest rates, are putting upward pressure on home prices and contributing to growing affordability challenges, as indicated by the latest quarterly reading of the NAHB/Wells Fargo Housing Opportunity Index.”
...
The HMI index measuring current sales conditions inched one point lower to 73 while the component gauging expectations in the next six months all fell a single point to 72. Meanwhile, the metric charting buyer traffic dropped two points to 49.

Looking at the three-month moving averages for regional HMI scores, the South and West each held steady at 70 and 75, respectively. The Northeast fell three points to 54 and the Midwest also posted a three-point decline to stand at 62.
emphasis added
NAHB HMI Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was below the consensus forecast, but still a solid reading.

Industrial Production Increased 0.1% in July

by Calculated Risk on 8/15/2018 09:22:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production edged up 0.1 percent in July after rising at an average pace of 0.5 percent over the previous five months. Manufacturing production increased 0.3 percent, the output of utilities moved down 0.5 percent, and, after posting five consecutive months of growth, the index for mining declined 0.3 percent. At 108.0 percent of its 2012 average, total industrial production was 4.2 percent higher in July than it was a year earlier. Capacity utilization for the industrial sector was unchanged in July at 78.1 percent, a rate that is 1.7 percentage points below its long-run (1972–2017) average.
emphasis added
Capacity Utilization Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.4 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.1% is 1.7% below the average from 1972 to 2017 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

Industrial ProductionThe second graph shows industrial production since 1967.

Industrial production increased in July to 107.3. This is 24% above the recession low, and 2% above the pre-recession peak.

This was below the consensus forecast, however production for June was revised up.

Retail Sales increased 0.5% in July

by Calculated Risk on 8/15/2018 08:37:00 AM

On a monthly basis, retail sales increased 0.5 percent from June to July (seasonally adjusted), and sales were up 6.4 percent from July 2017.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for July 2018, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $507.5 billion, an increase of 0.5 percent from the previous month, and 6.4 percent above July 2017. Total sales for the May 2018 through July 2018 period were up 6.3 percent from the same period a year ago. The May 2018 to June 2018 percent change was revised from up 0.5 percent to up 0.2 percent.
Retail Sales Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.5% in July.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Year-over-year change in Retail Sales Retail and Food service sales, ex-gasoline, increased by 5.1% on a YoY basis.

The increase in July was above expectations, however sales in May and June were revised down.

MBA: Mortgage Applications Decreased in Latest Weekly Survey

by Calculated Risk on 8/15/2018 07:00:00 AM

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

Mortgage applications decreased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 10, 2018.

... The Refinance Index remained unchanged from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 4 percent compared with the previous week and was 3 percent lower 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) decreased to 4.81 percent from 4.84 percent, with points decreasing to 0.43 from 0.45 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance Index Click on graph for larger image.


The first graph shows the refinance index since 1990.

This was unchanged from last week at the lowest level since December 2000.

Refinance activity will not pick up significantly unless mortgage rates fall 50 bps or more from the recent level.

Mortgage Purchase IndexThe second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 3% year-over-year.

Tuesday, August 14, 2018

Wednesday: Retail Sales, Industrial Production, Homebuilder Confidence, NY Fed Mfg

by Calculated Risk on 8/14/2018 06:03:00 PM

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

• At 8:30 AM, Retail sales for July will be released.  The consensus is for a 0.1% increase in retail sales. Retail and Food service sales, ex-gasoline, increased by 5.2% on a YoY basis in June.

• At 8:30 AM, The New York Fed Empire State manufacturing survey for August. The consensus is for a reading of 20.0, down from 22.6.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for July. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 78.2%.

• At 10:00 AM, The August NAHB homebuilder survey. The consensus is for a reading of  69, up from 68. Any number above 50 indicates that more builders view sales conditions as good than poor.

California Bay Area Home Sales Decline 3 Percent YoY in July, Inventory up 2% YoY

by Calculated Risk on 8/14/2018 01:31:00 PM

Here are some Bay Area stats from Pacific Union chief economist Selma Hepp: Finally More Bay Area Housing Inventory After 16 Months of Declines

• The Bay Area's decline in home sales (single-family and condominiums) improved in July, with only a 3 percent less activity year over year after a 13 percent decline in June.

• Inventory finally improved, up by 2 percent, after 16 consecutive months of year-over-year declines.

• Inventory above $1 million increased by 17 percent, mostly driven by more homes for sale in Santa Clara and San Mateo counties.

• Only Sonoma and Napa counties gained inventory below $1 million, up by 17 percent and by 5 percent respectively

• In contrast, San Francisco still lost inventory across all price ranges in July, declining by 14 percent. Contra Costa County saw inventory drop by 5 percent from July 2017.

NY Fed Q2 Report: "Total Household Debt Rises for 16th Straight Quarter"

by Calculated Risk on 8/14/2018 11:09:00 AM

From the NY Fed: Total Household Debt Rises for 16th Straight Quarter

he 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 $82 billion (0.6%) to $13.29 trillion in the second quarter of 2018. It was the 16th consecutive quarter with an increase, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Further, overall household debt is now 19.2% 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 $60 billion during the second quarter, to $9.00 trillion. Balances on home equity lines of credit (HELOC) continued their downward trend, declining by $4 billion, to $432 billion. The median credit score of newly originating mortgage borrowers was roughly unchanged, at 760.

"Aggregate household debt grew for the 16th consecutive quarter in the second quarter of 2018," said Wilbert van der Klaauw, senior vice president at the New York Fed, "While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans."
emphasis added
Total Household Debt Click on graph for larger image.

Here are two graphs from the report:

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

From the NY Fed:
Aggregate household debt balances increased in the second quarter of 2018 for the 16th consecutive quarter, and are now $618 billion higher than the previous (2008Q3) peak of $12.68 trillion. As of June 30, 2018, total household indebtedness was $13.29 trillion, an $82 billion (0.6%) increase from the first quarter of 2018. Overall household debt is now 19.2% above the 2013 Q2 trough.

Mortgage balances, the largest component of household debt, increased slightly during the second quarter. Mortgage balances shown on consumer credit reports on June 30 stood at $9.0 trillion, an increase of $60 billion from the first quarter of 2018. Balances on home equity lines of credit (HELOC), on a declining trend since 2009, saw a $4 billion drop in the second quarter and are now at $432 billion. Non-housing balances saw a $26 billion increase in the second quarter, with auto loans and credit cards increasing by $9 billion and $14 billion respectively.
Delinquency Status 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 Q2.  From the NY Fed:
Aggregate delinquency rates improved in the second quarter of 2018. As of June 30, 4.5% of outstanding debt was in some stage of delinquency, a very small improvement from the last quarter. Of the $598 billion of debt that is delinquent, $403 billion is seriously delinquent (at least 90 days late or “severely derogatory”). The flow into 90+ day delinquency for credit card balances has been rising for the last year and remained elevated during the second quarter, while the flow into 90+ day delinquency for auto loan balances has been slowly trending upward since 2012.

About 225,000 consumers had a bankruptcy notation added to their credit reports in 2018Q2, about the same number observed in the same quarter of last year. New bankruptcy notations have been at historically low levels since 2016.
There is much more in the report.

Small Business Optimism Index increased in July

by Calculated Risk on 8/14/2018 08:32:00 AM

From the National Federation of Independent Business (NFIB): July 2018 Report: Small Business Optimism Index

The Small Business Optimism Index marked its second highest level in the survey’s 45-year history at 107.9, rising to within 0.1 point of the July 1983 record-high of 108.
..
Fifty-nine percent reported hiring or trying to hire (down four points), but 52 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Twenty-three percent of owners cited the difficulty of finding qualified workers as their single most important business problem (up two points), one point below the 45-year record high.
emphasis added
Small Business Optimism Index Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 107.9 in July.

Note: Usually small business owners complain about taxes and regulations.  However, during the recession, "poor sales" was the top problem.

Now the difficulty of finding qualified workers is the top problem.

Monday, August 13, 2018

Tuesday: Q2 Quarterly Report on Household Debt and Credit

by Calculated Risk on 8/13/2018 06:51:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Hold Steady at 3-Week Lows

Mortgage rates stayed steady at the lowest levels in more than 3 weeks as financial markets are still accounting for additional risks relating to Turkey. Simply put, Turkey is in the midst of a debt/currency/banking crisis and investors are worried about some sort of domino effect among banks that are heavily invested in Turkish banks. All this is worth a bit of "safe-haven" demand for US Treasuries, which offer essentially risk-free returns and a liquid place to park money temporarily. [30YR FIXED - 4.625% - 4.75%]
emphasis added
Tuesday:
• At 6:00 AM ET,: NFIB Small Business Optimism Index for July.

• At 11:00 AM,: NY Fed: Q2 Quarterly Report on Household Debt and Credit

Long Beach Port Traffic "Dips" in July

by Calculated Risk on 8/13/2018 04:08:00 PM

From the Port of Long Beach: July Container Volumes Dip in Long Beach

The Port of Long Beach saw a decline in container volumes in July compared to the same month a year ago, which hit a historic high that has since been surpassed.

The drop, 4.4 percent, was attributed to shipping alliances’ decisions in July to shift vessel deployment and port calls. Port officials also raised concerns that escalating tariffs could slow trade activity — thus far the busiest in the Port’s 107-year history — during the remainder of the year.
...
For the calendar year, the Port of Long Beach is on pace for its busiest year ever, topping 2017. Through July, volumes are 11.3 percent or almost half a million TEUs over the same period in 2017, totaling 4.6 million TEUs. June 2018 volume at the Port was the highest in its history, at 752,188 TEUs.
This is the lowest level for exports in almost a year (imports are seasonal, so this is the lowest level for imports since April). The decline in exports could be related to shippers trying to beat the tariffs in June. I'll post a graph once the Port of Los Angeles reports July traffic.