by Calculated Risk on 5/18/2011 05:48:00 PM

Tomorrow morning will be busy, and I just wanted to touch on these three releases:

• Weekly Initial Unemployment Claims. The number of claims jumped up in recent weeks and this raises a key question: Is this a sign of renewed weakness in the labor market, or was the increase temporary? Goldman Sachs put out a note earlier this week arguing the increase in claims was mostly temporary due to auto-sector layoffs (related to supply chain and the earthquake in Japan), some unusual seasonal factors mostly (timing of Easter and shifting school holidays) and a few other miscellaneous factors. There were probably also some storm / flooding related claims, so we might not see a huge decline in the report tomorrow. The consensus is for a decrease to 420,000 from 434,000 last week - and this will be important to watch over the next few weeks.

• The Mortgage Bankers Association (MBA) will release the Q1 National Delinquency Survey (NDS) survey. My guess is this will show a sharp decline in overall delinquencies, but probably a record percentage of loans in the foreclosure process. I expect this will be viewed as good news (because of the sharp decline in overall delinquencies). I'll be on the conference call at 10:30 AM and pass along the comments.

• Existing Home Sales for April. Tom Lawler is estimating that the NAR will report that "existing home sales ran at a seasonally adjusted annual rate of 5.15 million in April, up 1% from March’s pace, but down 11.2% from last April’s tax-credit-goosed pace".

Probably more important than sales is the change in inventory. This is hard to predict, but Lawler expects a modest 1.5-2.0% increase from March to April. However Tom has warned that the NAR seems to always show a huge inventory increase in April, and even though the number is suspect, inventory is probably the key number in tomorrow's report.

Last April, the NAR reported inventory at 4.029 million units, and NAR reported 3.549 million in March 2011. It would take a pretty large month-to-month increase to see a positive year-over-year change in inventory.

This graph based on the March shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Inventory is not seasonally adjusted, so it really helps to look at the YoY change.

Click on graph for larger image in graph gallery.

Although inventory increased from February to March (as usual), inventory decreased 2.1% year-over-year in March (from March 2010). This is the second consecutive month with a small YoY decrease in inventory.

Although inventory is already very high, if the trend of declining year-over-year inventory continues there would be less pressure on house prices. Note: There are also questions about "active" inventory since it seems more homes are "pending" or otherwise not active in the listings, but that will not be addressed in the release tomorrow.