by Calculated Risk on 7/20/2012 02:53:00 PM

Low rates and HARP are driving activity ...

From Jon Prior at HousingWire: Big-four mortgage originations climb 37%

Mortgage originations at the big-four banks increased 37% in the second quarter from last year because of the expanded Home Affordable Refinance Program.
...
Wells continued to dominate. The San Francisco bank wrote $131.9 billion in new loans during the quarter, more than double originations from the same period last year. Wells said 16% of those new loans came through the Home Affordable Refinancing Program.
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Chase wrote $43.9 billion in new mortgages during the quarter, up 29% from last year and 14.3% from the previous quarter.
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Bank of America continues to feel the drop off from exiting its correspondent lending channel last year. Originations fell 55% from one year ago to roughly $18 billion, the only yearly decline of the big-four lenders.
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Citi originations totaled $12.9 billion, up 17% from last year but still down 10% from the previous quarter.

If the Fed does expand their balance sheet ("QE3") on Aug 1st, or at the September meeting, the purchases will probably be focused on agency mortgage backed securities. The people able to refinance might even get even lower rates, but many prospective borrowers will still be unable to refinance.

by Calculated Risk on 7/20/2012 11:13:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Regional and state unemployment rates were little changed in June. Twenty-seven states recorded unemployment rate increases, 11 states and the District of Columbia posted rate decreases, and 12 states had no change, the U.S. Bureau of Labor Statistics reported today.
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Nevada continued to record the highest unemployment rate among the states, 11.6 percent in June. Rhode Island and California posted the next highest rates, 10.9 and 10.7 percent, respectively. North Dakota again registered the lowest jobless rate, 2.9 percent, followed by Nebraska, 3.8 percent.

Click on graph for larger image in graph gallery.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). New York is at the maximum unemployment rate for the recession - every other state has some blue indicating some improvement. New Jersey is close to the recession maximum.

The states are ranked by the highest current unemployment rate. Only three states still have double digit unemployment rates: Nevada, Rhode Island, and California. This is the fewest since January 2009. In early 2010, 18 states and D.C. had double digit unemployment rates.

It appears some of the "sand states", with the largest housing bubbles, are starting to see faster declines in the unemployment rate (Arizona, Florida, California and Nevada).
All current employment graphs

by Calculated Risk on 7/20/2012 08:47:00 AM

From the WSJ: Euro Zone Approves Terms of Spain Bank Bailout

Luxembourg Finance Minister Luc Frieden told reporters there had been a "formal" adoption of the country's memorandum of understanding—the official document outlining the details of the financial assistance package.
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The bailout will pump up to €100 billion euros ($123 billion) into ailing Spanish banks and will aim to restore the country's financial sector.
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Also Friday, Spain's government said it expects the economy to remain in recession next year as it steps up austerity measures.

The yield on the Spanish 10 year bond is now above 7.2% - near the high.

More austerity. More recession. The beatings continue ...

by Calculated Risk on 7/19/2012 06:57:00 PM

Here is a sector that is growing ... expecting more imports from Asia:

From Ronald White at the LA Times: Ports of Los Angeles and Long Beach building at furious pace

At the edge of San Pedro Bay, home of North America's largest cargo complex, they're building new piers, wharves and rail yards at a furious pace ... So much construction is underway that the new facilities by themselves would move more freight than the entire port of Savannah, Ga., which ranks No. 4 among the continent's ports.
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The most expensive and extensive upgrades in the history of both ports will cost nearly $6 billion.
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About 640,000 people work in trade-related jobs in [SoCal] ... That's up from a low of fewer than 600,000 during the recession, but still far short of the 709,000 trade jobs in pre-recession 2007.

Earlier on Existing Home Sales:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 04:04:00 PM

In addition to Case-Shiller, CoreLogic, and LPS, I'm also watching the FNC, Zillow and other house price indexes.

FNC released their May index data today. FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.6% in May (Composite 100 index). The other RPIs (10-MSA, 20-MSA, 30-MSA) increased between 0.5% and 0.8% in May. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

The year-over-year trends continued to show improvement in May, with all four composite indexes down 1.8% to 2.1% compared to May 2011. For all the indexes, this is the smallest year-over-year decline in the FNC index since year-over-year prices started falling in 2007 (five years ago).

Click on graph for larger image.

This graph is based on the FNC index (four composites) through May 2012. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Some of the month-to-month gain is seasonal since this index is NSA. The key is the indexes are showing less of a year-over-year decline in May. If house prices have bottomed, the year-over-year decline should turn positive later this year or early in 2013.

The May Case-Shiller index will be released Tuesday, July 31st.

Earlier on Existing Home Sales:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales: Inventory and NSA Sales Graph
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 01:42:00 PM

Earlier ...

• From the Philly Fed: July 2012 Business Outlook Survey

The survey’s broadest measure of manufacturing conditions, the diffusion index of current activity, increased from a reading of −16.6 in June to −12.9. This marks the third consecutive negative reading for the index ...
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Labor market conditions at the reporting firms deteriorated this month. The current employment index decreased 10 points, to −8.4, its second negative reading in three months. ... Firms also indicated fewer hours worked this month: The average workweek index increased 2 points but posted its fourth consecutive negative reading.

Click on graph for larger image.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index. The dashed green line is an average of the NY Fed (Empire State) and Philly Fed surveys through July. The ISM and total Fed surveys are through June.

The average of the Empire State and Philly Fed surveys increased in July, but the average is still negative (contraction).

• The Conference Board leading indicators declined 0.3% in June:

The Conference Board Leading Economic Index® (LEI) for the U.S. declined 0.3 percent in June to 95.6 (2004 = 100), following a 0.4 percent increase in May, and a 0.1 percent decline in April.

Says Ataman Ozyildirim, economist at The Conference Board: “The U.S. LEI declined in two of the last six months, and its six-month growth rate has eased in the last three months. The strengths among the leading indicators have become less widespread as consumer expectations and manufacturing new orders offset gains in the financial, labor, and construction-related components. Meanwhile, the coincident economic index, a measure of current economic conditions, has risen slowly but steadily in the last three months.”

Says Ken Goldstein, economist at The Conference Board: “The U.S. economy is growing very slowly. The CEI basically reflects this steady but soft pace of overall economic activity. The LEI is pointing to no strengthening over the next few months, as the economy continues to sail through strong headwinds domestically and internationally.”

by Calculated Risk on 7/19/2012 11:47:00 AM

I can't emphasize enough - what matters the most in the NAR's existing home sales report is inventory; what matters the most in the new home sales report next week is sales. It is active inventory that impacts prices (although the "shadow" inventory will keep prices from rising). Those looking at the number of existing home sales for a recovery in housing are looking at the wrong number. For existing home sales, look at inventory first.

Although there are always questions about the NAR data, the report this morning was another positive housing report.

The NAR reported inventory decreased to 2.39 million units in June, down 3.2% from the downwardly revised 2.47 million in May (revised down from 2.49 million). This is down 24.4% from June 2011, and down 10.8% from the inventory level in June 2005 (mid-2005 was when inventory started increasing sharply). This is the lowest level for a June since 2002.

Clearly inventory will be below the comparable month in 2005 for the rest of the year and will probably track close to the level in 2004. It is also possible that inventory has peaked for 2012 (or is at least very close to the peak).

Important: The NAR reports active listings, and although there is some variability across the country in what is considered active, most "contingent short sales" are not included. "Contingent short sales" are strange listings since the listings were frequently NEVER on the market (they were listed as contingent), and they hang around for a long time - they are probably more closely related to shadow inventory than active inventory. However when we compare inventory to 2005, we need to remember there were no "short sale contingent" listings in 2005. In the areas I track, the number of "short sale contingent" listings is also down sharply year-over-year.

The following graph shows inventory by month since 2004. In 2005 (dark blue columns), inventory kept rising all year - and that was a clear sign that the housing bubble was ending.

Click on graph for larger image.

This year (dark red for 2012) inventory is at the lowest level for the month of June since 2002, and inventory is below the level in June 2005 (not counting contingent sales). However inventory is still elevated using months-of-supply, but I expect months-of-supply to be below 6 later this year.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA (red column) are above the sales for the 2009 and 2011 (2010 was higher because of the tax credit). Sales are well below the bubble years of 2005 and 2006.

On distressed sales from the NAR:

Distressed homes - foreclosures and short sales sold at deep discounts - accounted for 25 percent of June sales (13 percent were foreclosures and 12 percent were short sales), unchanged from May but down from 30 percent in June 2011.

However other data suggest distressed sales were down in June, and that is a positive sign for the housing market.

Earlier:
• Existing Home Sales in June: 4.37 million SAAR, 6.6 months of supply
• Existing Home Sales graphs

by Calculated Risk on 7/19/2012 10:00:00 AM

The NAR reports: June Existing-Home Prices Rise Again, Sales Down with Constrained Supply

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, declined 5.4 percent to a seasonally adjusted annual rate of 4.37 million in June from an upwardly revised 4.62 million in May, but are 4.5 percent higher than the 4.18 million-unit level in June 2011.
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Total housing inventory at the end June fell another 3.2 percent to 2.39 million existing homes available for sale, which represents a 6.6-month supply at the current sales pace, up from a 6.4-month supply in May. Listed inventory is 24.4 percent below a year ago when there was a 9.1-month supply.

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in June 2012 (4.37 million SAAR) were 5.4% lower than last month, and were 4.5% above the June 2011 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory declined to 2.39 million in June from the downwardly revised 2.47 million in May (revised down from 2.49 million). Inventory is not seasonally adjusted, and usually inventory increases from the seasonal lows in December and January to the seasonal high in mid-summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory decreased 24.4% year-over-year in June from June 2011. This is the sixteenth consecutive month with a YoY decrease in inventory, and the largest year-over-year decline reported.

Months of supply increased to 6.6 months in June.

This was below expectations of sales of 4.65 million. However, as I've noted before, those focusing on sales of existing homes, looking for a recovery for housing, are looking at the wrong number. For existing home sales, the key number is inventory - and the sharp year-over-year decline in inventory is a positive for housing. I'll have more later ...


All current Existing Home Sales graphs

by Calculated Risk on 7/19/2012 08:37:00 AM

The DOL reports:

In the week ending July 14, the advance figure for seasonally adjusted initial claims was 386,000, an increase of 34,000 from the previous week's revised figure of 352,000. The 4-week moving average was 375,500, a decrease of 1,500 from the previous week's revised average of 377,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims declined to 375,500.

The sharp decline last week due to onetime factors, and some increase was expected.

And here is a long term graph of weekly claims:

This was well above the consensus forecast of 365,000 and suggests ongoing weakness in the labor market.


All current Employment Graphs

by Calculated Risk on 7/18/2012 09:31:00 PM

Existing home sales for June is the key release on Thursday. Most of the focus will be on sales, but the key numbers are inventory and months-of-supply.

• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to increase to 365 thousand.

• At 10:00 AM, Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for sales of 4.65 million on seasonally adjusted annual rate (SAAR) basis, up from 4.55 million in May.


• Also at 10:00 AM, Philly Fed Survey for July will be released. This survey really surprised to the downside in June, and the consensus is for a reading of -8.0, up from -16.6 last month (below zero indicates contraction).

• Also at 10:00 AM, the Conference Board Leading Indicators for June will be released. The consensus is for a 0.1% decrease in this index.

Earlier:
• Housing Starts increased to 760 thousand in June, Highest since October 2008
• Starts and Completions: Multi-family and Single Family
• August 1st QE3 Departure Date?