by Calculated Risk on 7/10/2019 12:27:00 PM

From the HAR: Houston Home Sales Fall Shy of Last June's Record, But Continue to Outpace 2018

Despite continued strength in the Houston real estate market fueled by more robust inventory and low interest rates, June home sales could not match the historic levels of a year earlier, in June of 2018. According to the latest monthly report from the Houston Association of REALTORS® (HAR), single-family home sales were down 3.4 percent. However, on a year-to-date basis, sales are still outpacing 2018’s record volume.

June marked the first month of 2019 with declining single-family home sales, due to the record-breaking levels of one year earlier. Realtors sold a total of 8,097 units versus 8,385 a year earlier. That translates to a 3.4 percent decline. On a year-to-date basis, however, single-family home sales are running 1.4 percent ahead of 2018’s record pace.
...
June sales of all property types totaled 9,461. That is down 5.1 percent compared to the same month last year. Total dollar volume for the month declined 3.1 percent to $2.9 billion.

“We knew it would be difficult to top last June’s record-breaking sales volume, but the Houston real estate market remains strong and now offers prospective buyers an even greater selection of housing than they’ve had in some time,” said HAR Chair Shannon Cobb Evans with Heritage Texas Properties. “Consumers also continue to show interest in rental properties, which had another impressive performance in June.
...
Total active listings, or the total number of available properties, climbed 11.0 percent to 45,262. ...
emphasis added

Still on pace for record sales in Houston.

by Calculated Risk on 7/10/2019 12:06:00 PM

A few excerpts from a Merrill Lynch research note: The Fed cut is on for July

Fed Chair Powell delivered a dovish testimony, hinting strongly at an upcoming cut. We now expect a 25bp cut at the July 31st meeting followed by two more cuts at the next two meetings. We are sticking with our forecast of a cumulative 75bp of easing … The Fed seems to be willing to dismiss the better data from the US and instead is focusing on the weaker global data. Indeed, when Powell was asked if the strong jobs report changed his views on cuts, he stated "no". Rather Powell emphasized that "it appears that uncertainties around trade tensions and concerns about the strength of the global economy continue to weigh on the U.S. economic outlook. Inflation pressures remain muted." 

by Calculated Risk on 7/10/2019 08:39:00 AM

From Fed Chair Powell: Semiannual Monetary Policy Report to the Congress

Our baseline outlook is for economic growth to remain solid, labor markets to stay strong, and inflation to move back up over time to the Committee's 2 percent objective. However, uncertainties about the outlook have increased in recent months. In particular, economic momentum appears to have slowed in some major foreign economies, and that weakness could affect the U.S. economy. Moreover, a number of government policy issues have yet to be resolved, including trade developments, the federal debt ceiling, and Brexit. And there is a risk that weak inflation will be even more persistent than we currently anticipate. We are carefully monitoring these developments, and we will continue to assess their implications for the U.S economic outlook and inflation.

by Calculated Risk on 7/10/2019 07:00:00 AM

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

Mortgage applications decreased 2.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 5, 2019. This week’s results include an adjustment for the Fourth of July holiday.

... The Refinance Index decreased 7 percent from the previous week and was 88 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 18 percent compared with the previous week and was 6 percent higher than the same week one year ago.
...
“Mortgage applications were down slightly, even after adjusting for the July 4th holiday, as we saw opposing moves in purchase and refinance applications over the week. Purchase applications increased from the previous week and were up 5 percent from a year ago, a continuation of the strong annual growth that we saw in the first half of 2019. Refinance activity decreased over 6 percent and the refinance share of applications fell back below 50 percent, even as the 30-year, fixed-rate declined 3 basis points to 4.04 percent," said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. "Borrowers have been less sensitive to low rates as many borrowers have either recently refinanced or are likely waiting for rates to fall even further. Other mortgage rates in our survey were unchanged or slightly higher than in the previous week.”
...
The average contract interest rate for 30-year, fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.04 percent from 4.07 percent, with points increasing to 0.37 from 0.36 (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 around 4% now.

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 6% year-over-year.

by Calculated Risk on 7/09/2019 06:37:00 PM

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

• At 10:00 AM, Testimony, Fed Chair Jerome Powell, Semiannual Monetary Policy Report to the Congress, Before the House Financial Services Committee, Washington, D.C

• At 2:00 PM, FOMC Minutes, Meeting of June 18-19, 2019

by Calculated Risk on 7/09/2019 11:54:00 AM

This is a key former distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Local home prices increase slightly after three-month holding pattern, GLVAR housing statistics for June 2019

Local home prices broke out of a three-month holding pattern to post a slight increase during June, according to a report released Tuesday by the Greater Las Vegas Association of REALTORS® (GLVAR).
...
The total number of existing local homes, condos and townhomes sold during June was 3,626. Compared to one year ago, June sales were down 11.1% for homes and down 12.0% for condos and townhomes.
...
At the current sales pace, Carpenter said Southern Nevada still has less than a three-month supply of homes available for sale. While the local housing supply is up from one year ago, she said it’s still below what would normally be considered a balanced market.

By the end of June, GLVAR reported 7,815 single-family homes listed for sale without any sort of offer. That’s up 80.3% from one year ago. For condos and townhomes, the 1,937 properties listed without offers in June represented a 135.6% jump from one year ago.
...
The number of so-called distressed sales remains near historically low levels. GLVAR reported that short sales and foreclosures combined accounted for just 2.2% of all existing local property sales in June. That compares to 2.6% of all sales one year ago and 6.3% two years ago.
emphasis added

1) Overall sales were down 11.3% year-over-year to 3,626 in June 2019.

2) Active inventory (single-family and condos) is up sharply from a year ago, from a total of 5,157 in June 2018 to 9,752 in June 2019. Note: Total inventory was up 89% year-over-year.   This is a significant increase in inventory, although months-of-supply is still somewhat low.

3) Low level of distressed sales.

by Calculated Risk on 7/09/2019 10:09:00 AM

Notes: In May there were 7.449 million job openings, and, according to the May Employment report, there were 5.888 million unemployed. So, for the fifteenth 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 7.3 million on the last business day of May, the U.S. Bureau of Labor Statistics reported today. Over the month, hires fell to 5.7 million and separations edged down to 5.5 million. Within separations, the quits and the layoffs and discharges rates were unchanged at 2.3 percent and 1.2 percent, respectively. ...

The number of quits was little changed in May at 3.4 million. The quits rate was 2.3 percent.
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 May, the most recent employment report was for June.

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 May to 7.323 million from 7.372 million in April.

The number of job openings (yellow) are up 3% year-over-year.

Quits are up 2% 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 7/09/2019 08:58:00 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): June 2019 Report: Small Business Optimism Index

Optimism faded modestly in June, with the Small Business Optimism Index slipping 1.7 points to 103.3, reversing the gain posted in May but still leaving optimism at historically high levels.
..
Thirty-six percent of all owners reported job openings they could not fill in the current period, down 2 points from May but still high. A seasonally-adjusted net 19 percent plan to create new jobs, down 2 points.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index decreased to 103.3 in June.

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 7/08/2019 08:41:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Under Some Pressure

Mortgage rates began the day in slightly lower territory compared to last Friday afternoon, but they'd risen noticeably from Wednesday to Friday. The recovery seen this morning wasn't enough to get them back in line with Wednesday's levels. To make matters slightly worse, by the afternoon, rates started to move up yet again. [Most Prevalent Rates 30YR FIXED - 3.875%]
emphasis added

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

• At 10:00 AM, Job Openings and Labor Turnover Survey for May from the BLS.

by Calculated Risk on 7/08/2019 06:39:00 PM

The Northwest Multiple Listing Service reported Buyers Getting "Some Relief" as Key Indicators Point to Strong Summer for Housing Market

Inventory, pending sales and prices all increased during June compared to a year ago, according to the latest report from Northwest Multiple Listing Service. The same report, which covers 23 counties in Washington state, shows year-over-year drops area-wide in both the volume of new listings and closed sales.
...
House hunters had a broader selection to consider as inventory at month end totaled 16,800 active listings, about 9.5 percent larger than at the same time a year ago. Brokers added 11,977 new listings during the month, a drop from both a year ago when they added, 13,153 new listings, and from May, when they added 14,689 new listings.

About half the counties reported gains in inventory, led by King County where the selection grew nearly 32 percent from a year ago.
...
The Northwest MLS report indicates there is 1.76 months of inventory area-wide (matching May), with eight counties having less than two months of supply.
emphasis added

The press release is for the Northwest. In King County, sales were down 4.1% year-over-year, and active inventory was up 32% year-over-year.

In Seattle, sales were down 3.5% year-over-year, and inventory was up 69% year-over-year from very low levels.  This is another market with inventory increasing sharply year-over-year (but at a much slower rate than the previous months), but months-of-supply in Seattle is still on the low side at 2.1 months.