by Calculated Risk on 12/10/2019 03:57:00 PM

The Northwest Multiple Listing Service reported "November Surprise" brings "plenty of buyers"; uptick in home sales, prices

Brokers with Northwest Multiple Listing Service reported "plenty of buyers" competing for sparse inventory during November, which ended with a 7% year-over-year increase in pending sales. The volume of mutually accepted offers rose even more (9.2%) in the tri-county Puget Sound region consisting of King, Pierce and Snohomish counties, with Snohomish leading that list with a jump of about 12%.
...
Brokers reported 11,366 total active listings at month end, down more than 28 percent from twelve months ago when there were 15,830 active listings. November's selection was down about 21 percent from October.
emphasis added

The press release is for the Northwest. In King County, sales were up 11.1% year-over-year, and active inventory was down 33.5% year-over-year.

In Seattle, sales were up 21.7% year-over-year, and inventory was down 21.1% year-over-year..  The year-over-year increase in inventory has ended, and the months of supply is still low in Seattle (1.6 months).   In many areas it appears the inventory build that started last year is over.

by Calculated Risk on 12/10/2019 10:56:00 AM

By request, here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

NOTE: Several readers have asked if I could add a lag to these graphs (obviously a new President has zero impact on employment for the month they are elected). But that would open a debate on the proper length of the lag, so I'll just stick to the beginning of each term.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter and George H.W. Bush only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble, and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr Clinton (light blue) served for eight years without a recession.

Click on graph for larger image.

The first graph is for private employment only.

Mr. Trump is in Orange (34 months).

The employment recovery during Mr. G.W. Bush's (red) first term was sluggish, and private employment was down 821,000 jobs at the end of his first term.   At the end of Mr. Bush's second term, private employment was collapsing, and there were net 382,000 private sector jobs lost during Mr. Bush's two terms. 

Private sector employment increased by 20,979,000 under President Clinton (light blue), by 14,714,000 under President Reagan (dark red), 9,039,000 under President Carter (dashed green), 1,511,000 under President G.H.W. Bush (light purple), and 11,890,000 under President Obama (dark blue).

During the first 34 months of Mr. Trump's term, the economy has added 6,223,000 private sector jobs.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, and 2010. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However the public sector declined significantly while Mr. Obama was in office (down 269,000 jobs).

During the 34 months of Mr. Trump's term, the economy has added 334,000 public sector jobs.

The third graph shows the progress towards the Trump goal of adding 10 million jobs over his 4 year term.

After 34 months of Mr. Trump's presidency, the economy has added 6,557,000 jobs, about 526,000 behind the projection.

Note: Based on the preliminary Benchmark revision, there will be 501,000 fewer jobs in March 2019 after the Benchmark revision is released in February - so job growth is probably over 1 million behind the projection.

by Calculated Risk on 12/10/2019 09:43:00 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): November 2019 Report: Small Business Optimism Sees Major Spike in November

Small business optimism posted the largest month-over-month gain since May 2018, rising 2.3 points to 104.7 in November.
..
Finding qualified workers though remains the top issue for 26 percent reporting this as their number one problem, 1 point below August’s record high.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 104.7 in November.

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 a top problem.

by Calculated Risk on 12/09/2019 08:05:00 PM

From Matthew Graham at MortgageNewsDaily: Mortgage Rates Snap Back to Lower Levels

Mortgage rates reacted somewhat harshly to an incredibly strong jobs report last Friday. … There will always be some obligatory response to a report as strong as that. That was indeed the case on Friday and mortgage lenders were a bit defensive in setting rates. Fortunately, the underlying bond market improved throughout the day and held onto that improvement today. As such, lenders were willing to offer much lower rates versus Friday. [Today's Most Prevalent Rates For Top Tier Scenarios 30YR FIXED - 3.75 - 3.875%]

Click on graph for larger image.

This graph from Mortgage News Daily shows mortgage rates since 2014.

This graph is interactive, and you could view mortgage rates back to the mid-1980s - click here for interactive graph.

by Calculated Risk on 12/09/2019 02:02:00 PM

Former Fed Chair Paul Volcker has passed away. From the NY Times: Paul A. Volcker, Fed Chairman Who Waged War on Inflation, Is Dead at 92

Here are some excerpts from a prescient speech in February 2005: Paul Volcker Feb 2005 Stanford Speech

A few selected excerpts:

"Altogether, the circumstances seem as dangerous and intractable as I can remember."

"Boomers are spending like there is no tomorrow."

"Homeownership has become a vehicle for borrowing and leveraging as much as a source of financial security."

"I come now to the heart of the problem, as a Nation we are consuming and investing, that is spending, about 6% more than we are producing. What holds it all together? - High consumption - high leverage - government deficits - What holds it all together is a really massive and growing flow of capital from abroad. A flow of capital that today runs to more than $2 Billion per day."

"What I'm really talking about boils down to the oldest lesson of financial policy in Central Banking: A strong sense of monetary and fiscal discipline."

by Calculated Risk on 12/09/2019 11:12:00 AM

The consensus is there will no change to policy when the FOMC meets this week. After three rate cuts earlier this year, the FOMC appears to be on hold.

The unemployment rate and inflation projections will probably be revised down slightly. From Goldman Sachs:

[W]e expect only a minor change to the statement’s characterization of the economy, with overall growth still characterized as “moderate” but consumption downgraded to “solid.” We also expect the economic projections to show a lower unemployment rate path (and a slightly lower NAIRU) and lower inflation this year. … Following comments from many Fed officials that policy is now "in a good place," we expect the statement to indicate that the current stance of policy is “likely to remain appropriate.” As a result, we also look for the great majority of the 2020 dots to show an unchanged policy rate.

Here are the September FOMC projections.

Q1 real GDP growth was at 3.1% annualized, Q2 at 2.0% and Q3 at 2.1%. Currently most analysts are projecting around 1% to 2% in Q4. So the GDP projections will probably be little changed.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2019	2020	2021
Sept 2019	2.1 to 2.3	1.8 to 2.1	1.8 to 2.0
Jun 2019	2.0 to 2.2	1.8 to 2.2	1.8 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.5% in November.  The unemployment rate projection for Q4 2019 will probably be revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2019	2020	2021
Sept 2019	3.6 to 3.7	3.6 to 3.8	3.6 to 3.9
Jun 2019	3.6 to 3.7	3.5 to 3.9	3.6 to 4.0

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of October 2019, PCE inflation was up 1.3% from October 2018 So PCE inflation projections will probably be revised down.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2019	2020	2021
Sept 2019	1.5 to 1.6	1.9 to 2.0	2.0
Jun 2019	1.5 to 1.6	1.9 to 2.0	2.0 to 2.1

PCE core inflation was up 1.6% in October year-over-year. So Core PCE inflation will probably be revised down sligthly.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2019	2020	2021
Sept 2019	1.7 to 1.8	1.9 to 2.0	2.0
Jun 2019	1.7 to 1.8	1.9 to 2.0	2.0 to 2.1

In general, both unemployment and inflation are lower than expected.

by Calculated Risk on 12/09/2019 09:51:00 AM

Black Knight released their Mortgage Monitor report for October today. According to Black Knight, 3.39% of mortgages were delinquent in October, down from 3.64% in October 2018. Black Knight also reported that 0.48% of mortgages were in the foreclosure process, down from 0.52% a year ago.

This gives a total of 3.87% delinquent or in foreclosure.

Press Release: Black Knight Mortgage Monitor: Servicer Retention Rates Fall in Q3 2019 Despite Refinance Volumes Hitting Highest Point in Nearly Three Years

Today, the Data & Analytics division of Black Knight, Inc. released its latest Mortgage Monitor Report, based upon the company’s industry-leading mortgage performance, housing and public records datasets. This month, in light of the recent surge in refinance volumes, Black Knight looked at how servicers’ retention rates of refinancing borrowers have fared. As Black Knight Data & Analytics President Ben Graboske explained, despite refinance volumes hitting their highest point in nearly three years, retention rates fell in Q3 2019.

“After hitting an 18-year low in the fourth quarter of 2018, refinance lending has nearly doubled since then,” said Graboske. “The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with five times the number of such rate/term refis as there were in Q4 2018. Cash-out refinances were up as well, although by a more modest 24% over the same period. Still, cash-outs made up 52% of all Q3 2019 refinances, with homeowners withdrawing more than $36 billion in equity, the highest amount withdrawn via cash-outs in nearly 12 years. Given that tappable equity continues to grow – $6.2 trillion as of Q3 2019 – and the continued headwinds facing the HELOC market, this is a segment lenders and servicers may likely focus on in coming months. Any upward movement in rates would likely only drive the cash-out share of lending higher.

“But for both cash-out and rate/term refinances, borrowers are leaving their servicers at significant rates despite this surge in activity. Just 22% of borrowers stayed with their servicer post-refinance in Q3 2019. The business of nearly three of every four rate/term refinance borrowers – historically an easier segment to retain – was lost, with servicers retaining just 26% of borrowers, down from 29% in Q2 2019. Cash-out borrower retention was even more dismal, though, as servicers lost more than four out of every five borrowers post-refinance. That’s the lowest retention rate among that segment in more than two years. While refinance activity is up across the board, the characteristics of refinancing borrowers – along with their motivation and ‘trigger points’ to refinance – are anything but uniform. Advanced portfolio and market analysis can help servicers better understand changing borrower dynamics and tune their strategies accordingly.”
emphasis added

Click on graph for larger image.

Here is a graph from the Mortgage Monitor that shows the National Delinquency Rate over time.

From Black Knight:

• While October delinquency rate declines are common, this year's nearly 4% drop was almost twice the 20-year average

• The national delinquency rate is now 1.15% below its pre-recession (2000-2005) average, the largest such delta on record

• As delinquencies tend to trend upward seasonally in both November and December, a rise in the coming months would not be unexpected

The second graph shows equity withdrawn via cash-out refinances and 2nd mortgages:

• In Q3 2019, refinance lending hit its highest level in nearly three years, fueled by an increase in rate/term refinances

• The bulk of that increase was driven by people refinancing to improve the rate or term on their current mortgage, with 5X the number of such rate/term refis as there were in Q4 2018

• Cash-out refinances were up as well, although by a more modest 24%, over the same period

• Still, cash-outs made up 52% of all Q3 2019 refinances, with homeowners withdrawing more than $36 billion in equity, the largest amount in nearly 12 years

• Any upward movement in rates would likely drive the cash-out share of lending higher

There is much more in the mortgage monitor.

by Calculated Risk on 12/09/2019 12:12:00 AM

Weekend:
• Schedule for Week of December 8, 2019

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 5, and DOW futures are down 36 (fair value).

Oil prices were up over the last week with WTI futures at $58.90 per barrel and Brent at $64.19 barrel.  A year ago, WTI was at $53, and Brent was at $62 - so oil prices are up year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.58 per gallon. A year ago prices were at $2.42 per gallon, so gasoline prices are up 16 cents year-over-year.

by Calculated Risk on 12/08/2019 11:05:00 AM

Note: Due to the timing of Thanksgiving, the occupancy rate was down sharply YoY last week. The rate was up sharply in the previous report.

From HotelNewsNow.com: STR: US hotel results for week ending 30 November

he U.S. hotel industry reported negative year-over-year results in the three key performance metrics during the week of 24-30 November 2019, according to data from STR.

In comparison with the week of 25 November through 1 December 2018, the industry recorded the following:

• Occupancy: -11.6% to 50.6%
• Average daily rate (ADR): -6.7% to US$112.28
• Revenue per available room (RevPAR): -17.5% to US$56.83

STR analysts attribute significant performance declines to comparison of Thanksgiving week in 2019 against the week that followed the holiday in 2018.
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 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Occupancy has been solid in 2019, and close to-date compared to the previous 4 years.

However occupancy will be lower this year than in 2018 (the record year).

Seasonally, the 4-week average of the occupancy rate will decline into the winter.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 12/07/2019 08:11:00 AM

The key economic reports this week are November CPI and Retail Sales.

The FOMC meets this week, and no change to policy is expected.

----- Monday, Dec 9th -----
No major economic releases scheduled.

----- Tuesday, Dec 10th -----
6:00 AM: NFIB Small Business Optimism Index for November.

----- Wednesday, Dec 11th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The Consumer Price Index for November from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.2% increase in core CPI.

2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, Dec 12th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 212,000 initial claims, up from 203,000 last week.

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

12:00 PM: Q3 Flow of Funds Accounts of the United States from the Federal Reserve.

----- Friday, Dec 13th -----
8:30 AM ET: Retail sales for November will be released.  The consensus is for a 0.4% increase in retail sales.

This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 3.9% on a YoY basis.