by Calculated Risk on 4/24/2019 03:28:00 PM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Shows Second Monthly Gain in April

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.5 percent in April on a three-month moving average (3MMA) basis, the second monthly gain after several weak months.
...
“The latest CAB signals gains in U.S. commercial and industrial activity through mid-2019, but at a slow pace,” said Kevin Swift, chief economist at ACC. “As a result, the recovery and expansion underway is likely to surpass the record of 120 months set during the 1990s. The CAB reading suggests that there are glimmers of hope for improving activity in the closing months of the year.”
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

The year-over-year increase in the CAB suggests further gains in industrial production into 2019, but at a slow pace.

by Calculated Risk on 4/24/2019 10:58:00 AM

From the Philly Fed:

The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for March 2019. Over the past three months, the indexes increased in 44 states, decreased in five states, and remained stable in one, for a three-month diffusion index of 78. In the past month, the indexes increased in 37 states, decreased in eight states, and remained stable in five, for a one-month diffusion index of 58.
emphasis added

Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:

The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing by production workers, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.

Click on map for larger image.

Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and all or mostly green during most of the recent expansion.

The map is mostly green on a three month basis, but there are some red and grey (unchanged) states.

Source: Philly Fed.

Note: For complaints about red / green issues, please contact the Philly Fed.

And here is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In March, 41 states had increasing activity (including minor increases).

by Calculated Risk on 4/24/2019 09:26:00 AM

As part of the new home sales report released yesterday, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in March 2019 was $302,700. The average sales price was $376,000."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

Now it appears the home builders are offering some less expensive (and probably smaller) homes.

The average price in Mar 2019 2018 was $376,300, and the median price was $302,700.

The second graph shows the percent of new homes sold by price.

About 6% of new homes sold were under $150K in Mar 2019.  This is down from 30% in 2002, but up from recent levels.  In general, the under $150K bracket is going away.   

The $400K+ bracket increased significantly since the housing recovery started, but has started to decline.  Still, a majority of new homes (about 56%) in the U.S., are in the $200K to $400K range.

by Calculated Risk on 4/24/2019 07:00:00 AM

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

Mortgage applications decreased 7.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 19, 2019.

... The Refinance Index decreased 11 percent from the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 3 percent higher than the same week one year ago.
...
“The 30-year fixed mortgage rate has risen 10 basis points in three weeks, and is now at its highest level in over a month. Borrowers remain extremely sensitive to rate changes, which is why there has been a 28 percent drop in refinance applications over this three-week period. Purchase activity also declined, but remains almost 3 percent higher than a year ago,” said Mike Fratantoni, MBA Senior Vice President and Chief Economist. “Borrowing costs have recently drifted higher because of ebbing geopolitical concerns, as well as signs of strengthening in the U.S. economy, including the recent data pointing to robust retail sales.”

Added Fratantoni, “The strong economy and job market is keeping buyer interest high, but rising mortgage rates could add pressure to the budgets of some would-be buyers.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) increased to 4.46 percent from 4.44 percent, with points increasing to 0.44 from 0.42 (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.

Once mortgage rates fell more than 50 bps from the highs of last year, a number of recent buyers were able to refinance.  But it would take another significant decrease in rates to see a further increase in refinance activity.

The second graph shows the MBA mortgage purchase index

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

by Calculated Risk on 4/23/2019 02:31:00 PM

From the Richmond Fed: Fifth District Manufacturing Activity Moderated in April

Fifth District manufacturing activity moderated in April, according to the latest survey from the Richmond Fed. The composite index fell from 10 in March to 3 in April, weighed down by slightly negative readings in the indexes for both shipments and new orders but buoyed by a positive reading for the third component index, employment. Firms were optimistic, expecting conditions to improve in the next six months.

Survey results suggested continued positive growth in both employment and wages, although these indexes dropped slightly in April. However, firms reported a decline in the average workweek as they continued to struggle to find workers with the necessary skills. Firms expected this difficulty to continue in the coming months.
emphasis added

by Calculated Risk on 4/23/2019 11:35:00 AM

New home sales for March were reported at 692,000 on a seasonally adjusted annual rate basis (SAAR). This is the second highest sales rate for this cycle (just behind November 2017). This was well above the consensus forecast, however sales for the previous three months were revised down.

With these revisions, sales increased slightly, just 0.7%, in 2018 compared to 2017.   And my guess is we haven't seen the peak of this cycle yet.

Earlier: New Home Sales increased to 667,000 Annual Rate in February.

Click on graph for larger image.

This graph shows new home sales for 2018 and 2019 by month (Seasonally Adjusted Annual Rate).

Sales in March were up 3.0% year-over-year compared to March 2018.

Year-to-date (just through March), sales are up 1.7% compared to the same period in 2018.  The comparison will be most difficult in Q1, so this is a solid start for 2019.

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through March 2019. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes.

I still expect this gap to slowly close.   However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

Another way to look at this is a ratio of existing to new home sales.

This ratio was fairly stable from 1994 through 2006, and then the flood of distressed sales kept the number of existing home sales elevated and depressed new home sales. (Note: This ratio was fairly stable back to the early '70s, but I only have annual data for the earlier years).

In general the ratio has been trending down since the housing bust, and this ratio will probably continue to trend down over the next few years.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 4/23/2019 10:12:00 AM

The Census Bureau reports New Home Sales in March were at a seasonally adjusted annual rate (SAAR) of 692 thousand.

The previous three months were revised down.

"Sales of new single‐family houses in March 2019 were at a seasonally adjusted annual rate of 692,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.5 percent above the revised February rate of 662,000 and is 3.0 percent above the March 2018 estimate of 672,000."
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still somewhat low historically.

The second graph shows New Home Months of Supply.

The months of supply decreased in March to 6.0 months from 6.3 months in February.

The all time record was 12.1 months of supply in January 2009.

This is at the top of the normal range (less than 6 months supply is normal).

"The seasonally‐adjusted estimate of new houses for sale at the end of March was 344,000. This represents a supply of 6.0 months at the current sales rate."

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still somewhat low, and the combined total of completed and under construction is a little low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In March 2019 (red column), 68 thousand new homes were sold (NSA). Last year, 66 thousand homes were sold in March.

The all time high for March was 127 thousand in 2005, and the all time low for March was 28 thousand in 2011.

This was well above expectations of 645 thousand sales SAAR, however, sales in the three previous months were revised. I'll have more later today.

by Calculated Risk on 4/23/2019 08:58:00 AM

From Black Knight: Black Knight’s First Look: Prepayments Surge on Lower Interest Rates; Seasonal Delinquency Rate Improvement Remains Muted

• Prepayment activity increased by 28% month-over-month, the largest single-month increase in more than 2.5 years, in response to declining interest rates and the start of the homebuying season

• The national delinquency rate fell by 5.3% for the month, the smallest improvement for any March in six years in what is typically the strongest-performing month of the year

• March 2019 ended on a Sunday, which has historically led to an increase in delinquencies, and came on the heels of February’s atypical increase in delinquencies

• At 40,400 for the month, foreclosure starts were down 19.5 percent from January and edged close to September 2018’s 15-year low

• The month’s 39,700 foreclosure starts marked the lowest single-month volume in more than 18 years, while reduced outflow held active foreclosure inventory steady at 264,000

• Outstanding 90-day delinquencies have now fallen below 500,000 for the first time in more than 12 years

According to Black Knight's First Look report for March, the percent of loans delinquent decreased 5.3% in March compared to February, and decreased 2.0% year-over-year.

The percent of loans in the foreclosure process decreased 0.2% in March and were down 18.8% 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 3.65% in March, down from 3.89% in February.

The percent of loans in the foreclosure process decreased slightly in March to 0.51% from 0.51% in February.

The number of delinquent properties, but not in foreclosure, is down 9,000 properties year-over-year, and the number of properties in the foreclosure process is down 57,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	Mar 2019	Feb 2019	Mar 2018	Mar 2017
Delinquent	3.65%	3.89%	3.73%	3.62%
In Foreclosure	0.51%	0.51%	0.63%	0.88%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	1,903,000	2,019,000	1,912,000	1,831,000
Number of properties in foreclosure pre-sale inventory:	264,000	264,000	321,000	448,000
Total Properties	2,167,000	2,284,000	2,232,000	2,279,000

by Calculated Risk on 4/22/2019 07:28:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Modestly Higher to Start The Week

Mortgage rates were higher again on Monday, but just barely. The average lender was still in worse shape on Tuesday or Wednesday of last week when rates were the highest they'd been in about a month. [30YR FIXED - 4.25%]
emphasis added

Tuesday:
• At 9:00 AM: FHFA House Price Index for February 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM: New Home Sales for March from the Census Bureau. The consensus is for 645 thousand SAAR, down from 667 thousand in February.

• At 10:00 AM: Richmond Fed Survey of Manufacturing Activity for April.

by Calculated Risk on 4/22/2019 05:48:00 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.

Inventory, on a national basis, was up 2.4% year-over-year (YoY) in March, this was the eighth consecutive month with a YoY increase, following over three years of YoY declines.

The graph below shows the YoY change for non-contingent inventory in Houston, Las Vegas, and Sacramento and Phoenix, and total existing home inventory as reported by the NAR (through March).

Click on graph for larger image.

The black line is the year-over-year change in inventory as reported by the NAR.

Note that inventory was up 92% YoY in Las Vegas in March (red), the eight consecutive month with a YoY increase.

Houston is a special case, and inventory was up for several years due to lower oil prices, but declined YoY last year as oil prices increased.  Inventory was up 17.5% year-over-year in Houston in March.

Inventory is a key for the housing market.  Right now it appears the inventory build that started last year is slowing.

Also note that inventory in Seattle was up 136% year-over-year in March (not graphed)!