by Calculated Risk on 6/12/2019 08:10:00 AM

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

Mortgage applications increased 26.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 7, 2019. The results for the week ending May 31, 2019 included an adjustment for the Memorial Day holiday.

... The Refinance Index increased 47 percent from the previous week. The seasonally adjusted Purchase Index increased 10 percent from one week earlier. The unadjusted Purchase Index increased 20 percent compared with the previous week and was 10 percent higher than the same week one year ago.
...
“Mortgage rates for all loan types fell by a sizeable margin for the second straight week, pulled down by trade tensions with China and Mexico, the financial markets reacting to more bearish communication from several Fed officials, and weaker than expected hiring in May,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the less positive outlook, both purchase and refinance applications surged, driven mainly by these lower rates. The refinance index jumped 47 percent to its highest level since 2016.”

Added Kan, “With the 30-year fixed-rate mortgage at its lowest level since September 2017, purchase activity was more than 10 percent higher than a year ago. Demand is still relatively strong, but there is likely some restraint from prospective buyers, driven by some economic uncertainty. Furthermore, housing supply is still very tight for first-time buyers.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.12 percent from 4.23 percent, with points remaining unchanged at 0.33 (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.

Mortgage rates have declined from close to 5% late last year to under 4% recently.

Just about anyone who bought or refinanced over the last year or so can refinance now.   But it would take another significant decline in rates for a further large increase in refinance activity.

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 6/11/2019 08:05:00 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, The Consumer Price Index for May from the BLS. The consensus is for 0.1% increase in CPI, and a 0.2% increase in core CPI.

by Calculated Risk on 6/11/2019 05:24:00 PM

Special note: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

On the impact of the trade war, from Port of Long Beach Executive Director Mario Cordero: “One year into the trade war, escalating tariffs have pushed retailers to order goods early, warehouses are brimming with inventory as a result, and in response, ocean carriers are managing their vessels to deal with reduced demand,” Cordero said. “We are hopeful Washington and Beijing can resolve their differences before we see long-term changes to the supply chain that impact jobs in both nations.” emphasis added

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was down 0.5% in May compared to the rolling 12 months ending in April.   Outbound traffic was down 0.7% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year (February 5th in 2019).

In general imports have been increasing, and exports have mostly moved sideways over the last 8 years.

by Calculated Risk on 6/11/2019 11:59:00 AM

IMPORTANT NOTE: The data below is based on the Census 2018 estimates. Housing economist Tom Lawler has pointed out some questions about earlier Census estimates, see: Lawler: "New Long-Term Population Projections Show Slower Growth than Previous Projections but Are Still Too High"

Five years ago, I wrote: Census Bureau: Largest 5-year Population Cohort is now the "20 to 24" Age Group.

Note: For the impact on housing, also see: Demographics: Renting vs. Owning

This month the Census Bureau released the population estimates for 2018 by age, and I've updated the table from the previous post (replacing 2015 with 2018 data).

The table below shows the top 11 cohorts by size for 2010, 2018 (released this month), and Census Bureau projections for 2020 and 2030.

By the year 2020, 8 of the top 10 cohorts will be  under 40 (the Boomers will be fading away), and by 2030 the top 11 cohorts will be the youngest 11 cohorts (the reason I included 11 cohorts).

There will be plenty of "gray hairs" walking around in 2020 and 2030, but the key for the economy is the population in the prime working age group is now increasing.

This is positive for housing and the economy.

Population: Largest 5-Year Cohorts by Year
Largest Cohorts	2010	2018	2020	2030
1	45 to 49 years	25 to 29 years	25 to 29 years	35 to 39 years
2	50 to 54 years	30 to 34 years	30 to 34 years	40 to 44 years
3	15 to 19 years	55 to 59 years	35 to 39 years	30 to 34 years
4	20 to 24 years	20 to 24 years	Under 5 years	25 to 29 years
5	25 to 29 years	35 to 39 years	55 to 59 years	5 to 9 years
6	40 to 44 years	15 to 19 years	20 to 24 years	10 to 14 years
7	10 to 14 years	50 to 54 years	5 to 9 years	Under 5 years
8	5 to 9 years	10 to 14 years	60 to 64 years	15 to 19 years
9	Under 5 years	45 to 49 years	15 to 19 years	20 to 24 years
10	35 to 39 years	60 to 64 years	10 to 14 years	45 to 49 years
11	30 to 34 years	5 to 9 years	50 to 54 years	50 to 54 years

Click on graph for larger image.

This graph, based on the 2018 population estimate, shows the U.S. population by age in July 2018 according to the Census Bureau.

Note that the largest age groups are all in their mid-20s.

And below is a table showing the ten most common ages in 2010, 2018, 2020, and 2030 (projections are from the Census Bureau).

Note the younger baby boom generation dominated in 2010.  By 2018 the millennials have taken over.  And by 2020, the boomers are off the list.

My view is this is positive for both housing and the economy, especially in the 2020s.

Population: Most Common Ages by Year
	2010	2018	2020	2030
1	50	27	29	39
2	49	28	30	40
3	19	26	28	38
4	48	29	27	37
5	47	25	31	36
6	46	24	26	35
7	20	30	32	41
8	45	33	25	30
9	18	58	35	34
10	52	23	34	33

by Calculated Risk on 6/11/2019 09:09:00 AM

CR Note: Most of this survey is noise, but there is some information, especially on the labor market and the "Single Most Important Problem".

From the National Federation of Independent Business (NFIB): May 2019 Report: Small Business Optimism Index

Small business optimism eclipsed pre-shutdown levels, increasing 1.5 points to 105.0 in May.
..
[S]mall business owners added a net addition of 0.32 workers per firm, with 25 percent citing the difficulty of finding qualified workers as their Single Most Important Business Problem, matching the record high. Sixty-two percent of owners reported hiring or trying to hire employees, up five points from last month, but 54 percent reported few or no qualified applicants for the positions they were trying to fill (up five points).
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 105.0 in May.

Note: Usually small business owners complain about taxes and regulations (currently 2nd and 3rd on the "Single Most Important Problem" list).  However, during the recession, "poor sales" was the top problem. Now the difficulty of finding qualified workers is the top problem.

by Calculated Risk on 6/10/2019 07:22:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Move Up From Long-Term Lows

Mortgage rates had a fairly epic week last week, spending each day effectively pinned to the lowest levels since September 2017. That followed a swift move lower in the previous week and solid improvements every week since late April. … Things may be changing today. [Most Prevalent Rates 30YR FIXED - 3.875%]
emphasis added

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for May.

• At 8:30 AM, The Producer Price Index for May from the BLS. The consensus is for a 0.1% increase in PPI, and a 0.2% increase in core PPI.

by Calculated Risk on 6/10/2019 03:04:00 PM

The Northwest Multiple Listing Service reported Home Buyers Are "Better Off," But Market Is Heating Up

Year-over-year (YOY) closed sales rose about 1.6 percent (from 9,011 in May 2018 to last month's total of 9,153).
...
The MLS report for May shows 16,133 active listings at month end, up from the year-ago total of 12,956. King County recorded the largest gain in total inventory, at more than 62 percent, but supply remained below 2 months in that and several other counties.

System-wide there was 1.76 months of supply at the end of May, well below the 4-to-6 months that experts say indicate a balanced market.
emphasis added

The press release is for the Northwest. In King County, sales were up 5.8% year-over-year, and active inventory was up 62% year-over-year.

In Seattle, sales were up 5.6% year-over-year, and inventory was up 122% year-over-year from very low levels.  This is another market with inventory increasing sharply year-over-year, but months-of-supply in Seattle is still on the low side at 1.9 months.

by Calculated Risk on 6/10/2019 12:35:00 PM

The employment report has shown positive job growth for a record 104 months.

However, if we adjust for Decennial Census hiring and firing (data here) the streak of consecutive positive jobs reports was actually 111 months long. It makes sense to adjust for the Census hiring and firing since that was preplanned and unrelated to the business cycle.

If the job streak continues into 2020, then the headline streak will probably end in June 2020 when a large number of temporary Census workers are let go.  But if we adjust for temporary Census hiring, then the streak might continue.   Of course the streak could end any time.

Note that the Census expects to hire 40 to 60 thousand workers on a temporary basis later this year, and then let them go after a few months.   Then the Census will really ramp up in the Spring of 2020.  This is why I recently wrote: How to Report the Monthly Employment Number excluding Temporary Census Hiring

Click on graph for larger image.

This graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

The previous longest streak was 48 months ending in 1990.  If we adjust for the 1990 Decennial Census, that streak was actually 45 months - making the streak ending in 2007 at 46 months the second longest.

Note: If you have questions about this adjustment, see this post (including my discussion with the BLS).

by Calculated Risk on 6/10/2019 10:08:00 AM

Notes: In April there were 7.449 million job openings, and, according to the April Employment report, there were 5.824 million unemployed. So, for the fourteenth consecutive month, there were more job openings than people unemployed. Also note that the number of job openings has exceeded the number of hires since January 2015 (over 4 years).

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 7.4 million on the last business day of April, the U.S. Bureau of Labor Statistics reported today. Over the month, hires edged up to 5.9 million, and separations were little changed at 5.6 million. Within separations, the quits rate was unchanged at 2.3 percent and the layoffs and discharges rate was little changed at 1.2 percent. ...

The number of quits was little changed in April at 3.5 million. The quits rate was 2.3 percent. The quits level was little changed for total private and for government.
emphasis added

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for April, the most recent employment report was for May.

Click on graph for larger image.


Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings decreased in April to 7.449 million from 7.474 million in March.

The number of job openings (yellow) are up 5% year-over-year.

Quits are up 4% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job openings remain at a high level, and quits are still increasing year-over-year. This was a solid report.

by Calculated Risk on 6/10/2019 08:30:00 AM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

You have to look pretty hard to find good news in May’s rail traffic data, but disappointing news is easy to find. Total U.S. rail carloads were down 2.1% in May 2019 from May 2018, their fourth straight monthly decline. ... Carloads are taking hits from several sides. Flooding in the Midwest has been hindering the operations of railroads and many of their customers for a couple of months. More importantly, heightened economic uncertainty is being made worse by increased trade-related tensions; higher tariffs leading to reductions or disruptions of international trade; and lower industrial and manufacturing output. ... Ongoing trade disputes aren’t helping intermodal. In May, intermodal volume was down 5.9%, thanks in part to the trade disputes and tariffs that have been applied to imports in recent months.
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows U.S. average weekly rail carloads (NSA).  Red is 2019.

Rail carloads have been weak over the last decade due to the decline in coal shipments.

It’s not like the sky is falling (not yet, anyway), but U.S. rail traffic has certainly seen better days. Total U.S. rail carloads in May 2019 were 1.29 million, down 2.1%, or 28,065 carloads, from May 2018. That’s the fourth straight year-over-year monthly decline, something that last happened in late 2017

In 2019 through May, total U.S. carloads were down 2.4%, or 137,995 carloads, from 2018 through May. Since 1988, when our data begin, only 2016 had fewer total carloads for the first five months of the year.

The second graph is for intermodal traffic (using intermodal or shipping containers):

May was a disappointing month for intermodal. U.S. intermodal originations were down 5.9%, or 82,521 containers and trailers, in May 2019 from May 2018. The 5.9% decline was the largest percentage decline for any month since July 2016 and was the fourth-straight monthly decline for intermodal … The silver lining is that May 2018 was by far the highest-volume May in history for U.S. intermodal, so May 2019 faced a very tough comp and compared to years other than 2018, May 2019 wasn’t so bad.