by Calculated Risk on 11/05/2014 08:10:00 AM

From ADP:

Private sector employment increased by 230,000 jobs from September to October according to the October ADP National Employment Report®. ... The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is steadily picking up pace. Job growth is strong and broad-based across industries and company sizes. At this pace of job growth unemployment and underemployment is quickly declining. The job market will soon be tight enough to support a meaningful acceleration in wage growth.”

This was above the consensus forecast for 212,000 private sector jobs added in the ADP report. 

The BLS report for October will be released on Friday.

by Calculated Risk on 11/05/2014 07:00:00 AM

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

Mortgage applications decreased 2.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 31, 2014. ...

The Refinance Index decreased 6 percent from the previous week. The seasonally adjusted Purchase Index increased 3 percent from one week earlier.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) increased to 4.17 percent from 4.13 percent, with points increasing to 0.22 from 0.21 (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.

The refinance index is down 70% from the levels in May 2013.

Even with the recent slight increase in activity - as people who purchased in the last year or so refinance - refinance activity is very low this year and 2014 will be the lowest since year 2000.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 13% from a year ago.

by Calculated Risk on 11/04/2014 08:15:00 PM

From the WSJ: What Falling Exports Mean for U.S. Economic Growth

In response to Tuesday’s trade report (in addition to weak construction and factory orders data), economists are reducing the estimates for third-quarter real GDP growth. Economists at BNP Paribas now track third-quarter GDP at 2.8% and J.P. Morgan forecasters think the rate will be revised to 2.9%, while the econ shops at Goldman Sachs, Royal Bank of Scotland and Capital Economics think the rate will fall to about 3%.

The BEA will release the 2nd revision of GDP on November 25th, but so far it looks like GDP will be revised down.

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

• At 8:15 AM, the ADP Employment Report for October. This report is for private payrolls only (no government). The consensus is for 212,000 payroll jobs added in October, down from 213,000 in September.

• At 10:00 AM, the ISM non-Manufacturing Index for October. The consensus is for a reading of 58.0, down from 58.6 in September. Note: Above 50 indicates expansion.

by Calculated Risk on 11/04/2014 04:49:00 PM

Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.

The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).

Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand), however prices didn't fall as sharply either.

Click on graph for larger image in graph gallery.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through last week (via NAHB), and 2) CME framing futures.

Right now Random Lengths prices are down about 5% from a year ago, and CME futures are down 12% year-over-year.

by Calculated Risk on 11/04/2014 02:31:00 PM

From housing economist Tom Lawler:

The National Association of Realtors released the results of its 2014 Profile of Home Buyers and Sellers, which are based on a survey of buyers who purchased a home between July 2013 and June 2014. The survey is sent to the address of the home purchased, and the virtually all respondents purchased a home for their primary residence. Thus, characteristics of buyers from the survey reflect characteristics of primary residence purchases, and not all home purchases.

According to the 2014 survey, the first-time home buyer share of primary residence home purchases over the 12 month period ending June 2014 was 33%, down from 38% a year earlier and the lowest share since the NAR has attempted to measure the share. The first-time buyer share from this survey includes both new and existing homes.

Click on graph for larger image in graph gallery.

As noted above, the first-time buyer share from the Profile of Home Buyers and Sellers is an estimate of the first-time buyer share of primary residence purchases. The first-time buyer share reported in the NAR’s monthly existing home sales press release, in contrast, is an estimate of the first-time buyer share of total existing home sales, and is based on the buyer characteristics of the last home transaction in a given month of realtors who respond to the survey. When folks say that the “normal” first-time home buyer share is around 40%, they either are or should be referring to the first-time buyer share of homes sold to buyers of their primary residences. Obviously, the “normal” first-time buyer share of total home sales is lower, though it is not clear by how much, because there are no good, reliable data on the investor/second home share of total home sales.

Here are a few other “snippets” from the 2014 PHBS.

• Eighty-eight percent of primary residence buyers financed their home purchase, and for those who financed their purchase, the buyers “typically” financed 90 percent. Ninety-five percent of first-time buyers financed their purchase, compared to 84 percent of repeat buyers.

Comment: The implied “all-cash” share of primary residence purchases seems way too low, and the implied average LTV for purchase mortgage originations seems way too high. That has been true of past reports as well.

• The typical home seller had lived in his/her home for 10 years, and 17 percent of recent sellers had delayed selling their home because the value of their home was below their outstanding mortgage balance. In 2006 and 2007 the typical seller had lived in his/her home for six years.

• Buyers “expect” to live in their homes for 12 years, compared to 8 years in 2006.

Comment: this statistic reflects the “median” expected length of tenure in home purchased, and excludes a sizable “don’t know” category that has grown over time. I don’t have the full 2014 report, but here is a comparison of buyers’ responses on their expected “length of tenure” from the 2013 PHBS compared to the 2006 PHBS.

Expected Length of Tenure in Home Purchased by Age Group, NAR 2006 PHBS (percent of group)
	All Buyers	18-24	25-44	45-64	65+
<=3 Years	12%	18	14	9	7
4 to 5 years	18	36	23	11	5
6 to 10 years	19	23	21	20	12
11+ Years	26	10	24	32	27
Don't Know	24	12	18	28	49
"Median" (years)	8 years	5	6	9	12

Expected Length of Tenure in Home Purchased by Age Group, NAR 2013 PHBS (percent of group)
	All Buyers	18-24	25-44	45-64	65+
<=3 Years	3%	5	4	5	3
4 to 5 years	9	11	12	6	5
6 to 10 years	18	24	20	15	12
11+ Years	33	28	33	37	27
Don't Know	37	31	32	37	54
"Median" (years)	15 years	10	10	20	15

In 2006, when mortgage credit was easy and when consumer expectations for future home price growth were high, an exceptionally large percentage of home buyers, especially among “young adults” (and probably first time buyers) expected to remain in their recently purchased home for less than 3-5 years. In 2013, when credit was “tight” and when expectations for home price growth were “subdued,” there apparently were a lot fewer buyers who expected to live in their purchased home for less than five years – which makes sense, given the high transactions costs associated both with buying and with selling a home.

by Calculated Risk on 11/04/2014 11:31:00 AM

Notes: This CoreLogic House Price Index report is for September. The recent Case-Shiller index release was for August. The CoreLogic HPI is a three month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic Reports Home Prices Rose by 5.6 Percent Year Over Year in September 2014

Home prices nationwide, including distressed sales, increased 5.6 percent in September 2014 compared to September 2013. This change represents 31 months of consecutive year-over-year increases in home prices nationally. On a month-over-month basis, home prices nationwide, including distressed sales, dropped by 0.1 percent in September 2014 compared to August 2014.
...
Excluding distressed sales, home prices nationally increased 5.2 percent in September 2014 compared to September 2013 and 0.1 percent month over month compared to August 2014. Also excluding distressed sales, 49 states and the District of Columbia showed year-over-year home price appreciation in August, with Mississippi being the only state to experience a year-over-year decline (-0.9 percent). Distressed sales include short sales and real estate owned (REO) transactions. ...

“Home prices continue to rise compared with this time last year but the rate of growth is clearly slowing as we exit 2014,” said Anand Nallathambi, president and CEO of CoreLogic.
emphasis added

Click on graph for larger image.

This graph shows the national CoreLogic HPI data since 1976. January 2000 = 100.

The index was down 0.1% in September, and is up 5.6% over the last year.

This index is not seasonally adjusted, and - as I predicted last month - the index turned slightly negative month-to-month in September (this is the beginning of the seasonally weak period for house prices).


The second graph is from CoreLogic. The year-over-year comparison has been positive for thirty one consecutive months suggesting house prices bottomed early in 2012 on a national basis (the bump in 2010 was related to the tax credit).

The YoY increases continue to slow.

This index was up 11.8% YoY in February 2014, and the YoY increase has been slowing since then. In July, the YoY increase was 6.4%, in August 5.8% and now, in September, the increase was 5.6%.

by Calculated Risk on 11/04/2014 08:43:00 AM

Earlier the Department of Commerce reported:

[T]otal September exports of $195.6 billion and imports of $238.6 billion resulted in a goods and services deficit of $43.0 billion, up from $40.0 billion in August, revised. September exports were $3.0 billion less than August exports of $198.6 billion. September imports were $0.1 billion more than August imports of $238.6 billion.

The trade deficit was larger than the consensus forecast of $40.7 billion and the trade deficit was revised down slightly for August.

The first graph shows the monthly U.S. exports and imports in dollars through September 2014.

Click on graph for larger image.

Imports increased slightly and exports decreased in August.  

Exports are 18% above the pre-recession peak and up 3% compared to September 2013; imports are 3% above the pre-recession peak, and up about 3% compared to September 2013. 

The second graph shows the U.S. trade deficit, with and without petroleum, through September.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Oil imports averaged $92.54 in September, down from $96.32 in August, and down from $102.00 in September 2013.  The petroleum deficit has generally been declining and is the major reason the overall deficit has declined since early 2012.  Oil prices will really decline in the October and November reports!

The trade deficit with China increased to $35.6 billion in September, from $30.6 billion in September 2013.  The deficit with China is almost all of the overall deficit.

by Calculated Risk on 11/03/2014 09:00:00 PM

Two weeks ago, Professor James Hamilton wrote: How will Saudi Arabia respond to lower oil prices? (read entire piece!).  Hamilton wrote:

it’s primarily a question of responding to surging output of U.S. tight oil. My guess is that Saudi Arabia would lower prices rather than cut production ...

And today from the WSJ: Oil Skids as Saudis Adjust Prices

U.S. oil prices tumbled to a fresh two-year low Monday on news that Saudi Arabia cut its selling price for oil to the U.S., suggesting that the kingdom is trying to compete with U.S. shale oil.

Bloomberg shows WTI down to $78.24 a barrel, and Brent down to $84.78. So gasoline prices should continue to decline (currently $2.96 per gallon national average).

Tuesday:
• At 8:30 AM ET, the Trade Balance report for September from the Census Bureau. The consensus is for the U.S. trade deficit to be at $40.7 billion in September from $40.1 billion in August.

• At 10:00 AM, the Manufacturers' Shipments, Inventories and Orders (Factory Orders) for September. The consensus is for a 0.7 decrease in September orders.

by Calculated Risk on 11/03/2014 05:12:00 PM

From the Federal Reserve: The October 2014 Senior Loan Officer Opinion Survey on Bank Lending Practices

Regarding loans to businesses, the October survey results indicated that only a modest net fraction of banks eased their standards for commercial and industrial (C&I) loans to firms of all sizes, but generally larger net fractions of banks eased each of the pricing terms listed in the survey and some non-price terms. Banks also reported having eased standards for construction and land development loans, a category of commercial real estate (CRE) loans included in the survey. On the demand side, modest net fractions of banks reported stronger demand for C&I loans to larger firms; similar net fractions experienced stronger demand for all three categories of CRE loans covered in the survey.
...
Regarding loans to households, some large banks reported having eased standards on closed-end mortgage loans, but respondents generally indicated little change in standards and terms for other types of loans to households. Reported changes in loan demand were mixed. Moderate net fractions of banks reported stronger demand for auto loans and weaker demand for nontraditional closed-end mortgage loans. Demand for other types of loans to households was about unchanged at most banks.
emphasis added

Click on graph for larger image.

Here are some charts from the Fed.

This graph shows the change in lending standards and for CRE (commercial real estate) loans.

Banks are loosening their standards for CRE loans, and for various categories of CRE (right half of graph).  Multifamily is seeing slightly tighter standards for the second consecutive quarter.

The second graph shows the change in demand for CRE loans.

Banks are seeing a pickup in demand for all categories of CRE.

This suggests (along with the Architecture Billing Index) that we will see a further increase in commercial real estate development.

by Calculated Risk on 11/03/2014 02:30:00 PM

Based on an WardsAuto estimate, light vehicle sales were at a 16.35 million SAAR in October. That is up 7% from October 2013, and unchanged from the 16.34 million annual sales rate last month.

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for October (red, light vehicle sales of 16.35 million SAAR from WardsAuto).

This was below the consensus forecast of 16.6 million SAAR (seasonally adjusted annual rate).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate.

This was the sixth consecutive month with a sales rate over 16 million.