by Calculated Risk on 4/15/2014 02:59:00 PM

From DataQuick: Southland Home Sales Stuck at 6-year Low; Median Price Rises to 6-Year High

Southern California home sales quickened last month compared with February, as they normally do, but remained far below average and at the lowest level for a March in six years. ... A total of 17,638 new and resale houses and condos sold in Los Angeles, Riverside, San Diego, Ventura, San Bernardino and Orange counties last month. That was up 25.7 percent from 14,027 sales in February, and down 14.3 percent from 20,581 sales in March last year, according to San Diego-based DataQuick.
...
Sales during the month of March have ranged from a low of 12,808 in 2008 to a high of 37,030 in 2004. Last month’s sales were 26.9 percent below the average number of sales – 24,115 – for March since 1988. Sales haven’t been above average for any month in more than seven years.

“Southland home buying got off to a very slow start this year, with last month’s sales coming in at the second-lowest level for a March in nearly two decades. We see multiple reasons for this: The inventory of homes for sale remains thin in many markets. Investor purchases have fallen. The jump in home prices and mortgage rates over the past year has priced some people out of the market, while other would-be buyers struggle with credit hurdles. Also, some potential move-up buyers are holding back while they weigh whether to abandon a phenomenally low interest rate on their current mortgage in order to buy a different home,” said DataQuick analyst Andrew LePage.

Foreclosure resales – homes foreclosed on in the prior 12 months – accounted for 6.4 percent of the Southland resale market in March. That was down from a revised 6.7 percent the prior month and down from 13.8 percent a year earlier. In recent months the foreclosure resale rate has been the lowest since early 2007. In the current cycle, foreclosure resales hit a high of 56.7 percent in February 2009.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 7.7 percent of Southland resales last month. That was down from a revised 9.3 percent the prior month and down from 18.7 percent a year earlier.

Absentee buyers – mostly investors and some second-home purchasers – bought 27.4 percent of the homes sold last month, down from 28.9 percent in February and down from 31.2 percent a year earlier.
emphasis added

Generally both distressed sales and investor buying is declining - and this is dragging down overall sales (plus inventory is still very low).   And even though total sales are down year-over-year, normal equity transactions are up 9% year-over-year.

It is important to recognize that declining existing home sales is NOT a negative indicator for the housing recovery.  The reason for the decline in overall existing home sales is fewer distressed sales and less investor buying. Those are positive trends!

by Calculated Risk on 4/15/2014 11:15:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.6% annualized rate) in March. The 16% trimmed-mean Consumer Price Index also increased 0.2% (2.4% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.2% (2.4% annualized rate) in March. The CPI less food and energy increased 0.2% (2.5% annualized rate) on a seasonally adjusted basis.

Note: The Cleveland Fed has the median CPI details for March here.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.1%, the trimmed-mean CPI rose 1.7%, and the CPI less food and energy rose 1.7%. Core PCE is for February and increased just 1.1% year-over-year.

On a monthly basis, median CPI was at 2.6% annualized, trimmed-mean CPI was at 2.4% annualized, and core CPI increased 2.5% annualized.

These measures suggest inflation remains below the Fed's target.

by Calculated Risk on 4/15/2014 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 47 in April, up from 46 in March. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Holds Steady in April

Builder confidence in the market for newly built, single-family homes rose one point to 47 in April from a downwardly revised March reading of 46 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today.
...
“Job growth is proceeding at a solid pace, mortgage interest rates remain historically low and home prices are affordable,” said NAHB Chief Economist David Crowe. “While these factors point to a gradual improvement in housing demand, headwinds that are holding up a more robust recovery include ongoing tight credit conditions for home buyers and the fact that builders in many markets are facing a limited availability of lots and labor.”

Derived from a monthly survey that NAHB has been conducting for 30 years, the NAHB/Wells Fargo Housing Market Index gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

The HMI index gauging current sales conditions in April held steady at 51 while the component gauging traffic of prospective buyers was also unchanged at 32. The component measuring expectations for future sales rose four points to 57.

The HMI three-month moving average was down in all four regions. The West fell nine points to 51 and the Midwest posted a four-point decline to 49 while the Northeast and South each dropped two points to 33 and 47, respectively.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was the third  consecutive reading below 50.

by Calculated Risk on 4/15/2014 08:36:00 AM

Note: The BLS reported:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent in March on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.5 percent before seasonal adjustment.
...
The index for all items less food and energy also rose 0.2 percent in March.

I'll have more on inflation later.

From the NY Fed: Empire State Manufacturing Survey

The April 2014 Empire State Manufacturing Survey indicates that business activity was flat for New York manufacturers. The headline general business conditions index slipped four points to 1.3. The new orders index fell below zero to -2.8, pointing to a slight decline in orders, and the shipments index was little changed at 3.2. ...

Employment indexes suggested modest improvement in labor market conditions. The index for number of employees inched up to 8.2, indicating a small increase in employment levels, and the average workweek index fell three points to 2.0, pointing to a slight increase in hours worked.

Indexes for the six-month outlook continued to convey a fair amount of optimism about future business conditions. The index for expected general business conditions advanced five points to 38.2. The index for future new orders fell for a second consecutive month, though it remained at a fairly high level of 32.7.
emphasis added

This is the first of the regional surveys for April.  The general business conditions index was below the consensus forecast of a reading of 7.5, and indicates slower expansion in April than in March.

by Calculated Risk on 4/14/2014 09:05:00 PM

The retail sales report released this morning was solid, but some of the strength was probably some bounce-back from the severe winter weather. Still the economy will probably be stronger in 2014 than in 2013.

From the LA Times: Surging retail sales signal an economy on the upswing

"We are inclined to view March strength as part of a normalization from a very weak winter, particularly December and January," Credit Suisse analysts wrote in a note to clients Monday.
...
"It's a bit early to put too much weight on the retail sales number," [Standard & Poor's analyst Diya Iyer] said. "We're hearing from a lot of companies that same-store sales aren't great."
...
Economists had also braced for retail sales to take more of a hit from a calendar shift that pushed Easter into April this year after helping to pad sales in March 2013.

Tuesday:
• At 8:30 AM ET, the Consumer Price Index for March. The consensus is for a 0.1% increase in CPI in February and for core CPI to increase 0.1%.

• Also at 8:30 AM, the NY Fed Empire State Manufacturing Survey for April. The consensus is for a reading of 7.5, up from 5.6 in March (above zero is expansion).

• At 8:45 AM, Speech by Fed Chair Janet Yellen, Opening Remarks, At the Federal Reserve Bank of Atlanta Conference: 2014 Financial Markets Conference, Stone Mountain, Georgia.

• At 10:00 AM, the April NAHB homebuilder survey. The consensus is for a reading of 50, up from 47 in March. Any number above 50 indicates that more builders view sales conditions as good than poor.

by Calculated Risk on 4/14/2014 05:42:00 PM

Several years ago I started following the Sacramento market to look for changes in the mix of houses sold (conventional, REOs, and short sales).  For a long time, not much changed. But over the last 2+ years we've seen some significant changes with a dramatic shift from foreclosures (REO: lender Real Estate Owned) to short sales, and the percentage of total distressed sales declining sharply.

This data suggests healing in the Sacramento market, although some of this is due to investor buying.  Other distressed markets are showing similar improvement.  Note: The Sacramento Association of REALTORS® started breaking out REOs in May 2008, and short sales in June 2009.

In March 2014, 16.3% of all resales (single family homes) were distressed sales. This was down from 19.1% last month, and down from 37.5% in March 2013.

The percentage of REOs was at 7.8%, and the percentage of short sales was 8.5%.

Here are the statistics.

Click on graph for larger image.

This graph shows the percent of REO sales, short sales and conventional sales.

There has been a sharp increase in conventional sales over the last 2 years (blue). 

Active Listing Inventory for single family homes increased 71.2% year-over-year in February. 

Cash buyers accounted for 22.5% of all sales, down from 36.4% in March 2013, and down from 26.5% last month (frequently investors).  This has been trending down, and it appears investors are becoming less of a factor in Sacramento.

Total sales were down 12.4% from March 2013, but conventional sales were up 16.4% compared to the same month last year. This is exactly what we expect to see in an improving distressed market - flat or even declining overall sales as distressed sales decline, and conventional sales increasing.

As I've noted before, we are seeing a similar pattern in other distressed areas. 

by Calculated Risk on 4/14/2014 03:33:00 PM

Here is another weekly update on housing inventory ...

There is a clear seasonal pattern for inventory, with the low point for inventory in late December or early January, and then usually peaking in mid-to-late summer.

The Realtor (NAR) data is monthly and released with a lag (the most recent data was for February).  However Ben at Housing Tracker (Department of Numbers) has provided me some weekly inventory data for the last several years.

Click on graph for larger image.

This graph shows the Housing Tracker reported weekly inventory for the 54 metro areas for 2010, 2011, 2012, 2013 and 2014.

In 2011 and 2012, inventory only increased slightly early in the year and then declined significantly through the end of each year.

In 2013 (Blue), inventory increased for most of the year before declining seasonally during the holidays.  Inventory in 2013 finished up 2.7% YoY.

Inventory in 2014 (Red) is now 7.8% above the same week in 2013.

Inventory is still very low, but this increase in inventory should slow house price increases. 

Note: One of the key questions for 2014 will be: How much will inventory increase?  My guess is inventory will be up 10% to 15% year-over-year by the end of 2014 (inventory would still be below normal).

by Calculated Risk on 4/14/2014 11:00:00 AM

The Congressional Budget Office (CBO) released their new Updated Budget Projections: 2014 to 2024. The projected budget deficits have been reduced for each of the next ten years, and the projected deficit for 2014 has been revised down from 3.0% to 2.8%.

From the CBO:

As it usually does each spring, CBO has updated the baseline budget projections that it released earlier in the year. CBO now estimates that if the current laws that govern federal taxes and spending do not change, the budget deficit in fiscal year 2014 will be $492 billion. Relative to the size of the economy, that deficit—at 2.8 percent of gross domestic product (GDP)—will be nearly a third less than the $680 billion shortfall in fiscal year 2013, which was equal to 4.1 percent of GDP. This will be the fifth consecutive year in which the deficit has declined as a share of GDP since peaking at 9.8 percent in 2009.
...
CBO’s estimate of the deficit for this year is $23 billion less than its February estimate, mostly because the agency now anticipates lower outlays for discretionary programs and net interest payments. The projected cumulative deficit from 2015 through 2024 is $286 billion less than it was in February.
...
But if current laws do not change, the period of shrinking deficits will soon come to an end. Between 2015 and 2024, annual budget shortfalls are projected to rise substantially—from a low of $469 billion in 2015 to about $1 trillion from 2022 through 2024—mainly because of the aging population, rising health care costs, an expansion of federal subsidies for health insurance, and growing interest payments on federal debt.
emphasis added

The CBO projects the deficit will decline further in 2015, and be below 3% of GDP through fiscal 2018.  Then the deficit will slowly increase.

Click on graph for larger image.

This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO.

After 2015, the deficit will start to increase again according to the CBO.

by Calculated Risk on 4/14/2014 08:48:00 AM

On a monthly basis, retail sales increased 1.1% from February to March (seasonally adjusted), and sales were up 3.8% from March 2013. Sales in February were revised up from a 0.3% increase to a 0.7% increase. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for March, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $433.9 billion, an increase of 1.1 percent from the previous month, and 3.8 percent above March 2013. ... The January 2014 to February 2014 percent change was revised from +0.3 percent to +0.7 percent

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).


Retail sales ex-autos increased 0.7%. 

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 4.6% on a YoY basis (3.8% for all retail sales).

The increase in March was above consensus expectations and this was a strong report.

by Calculated Risk on 4/13/2014 08:38:00 PM

Monday:
• At 8:30 AM ET, Retail sales for March will be released. The consensus is for retail sales to increase 0.8% in March, and to increase 0.4% ex-autos.

• At 10:00 AM, Manufacturing and Trade: Inventories and Sales (business inventories) report for February. The consensus is for a 0.5% increase in inventories.

• At 11:00 AM, CBO will release its updated 10-year baseline projections of federal spending, revenues, and budget deficits.

Weekend:
• Schedule for Week of April 13th

• Q1 Review: Ten Economic Questions for 2014

From CNBC: Pre-Market Data and Bloomberg futures: the S&P futures and DOW futures are mostly unchanged (fair value).

Oil prices are up with WTI futures at $104.05 per barrel and Brent at $107.33 per barrel.

Below is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are around $3.60 per gallon, up sharply from earlier this year and more than 5 cents higher than last year at this time. If you click on "show crude oil prices", the graph displays oil prices for WTI, not Brent; gasoline prices in most of the U.S. are impacted more by Brent prices.

Orange County Historical Gas Price Charts Provided by GasBuddy.com