by Calculated Risk on 2/04/2016 12:38:00 PM

From housing economist Tom Lawler:

Below is a table showing some selected operating statistics from large, publicly-traded home builders for the quarter ending December 31, 2015.

Combined net home orders for these seven home builders last quarter were up 11.7% from the comparable quarter of 2014, while home deliveries were up 6.3% YOY. For the group as a whole deliveries were a bit lower (as were revenues and earnings) than one would have expected based on order backlogs, which mainly reflected longer-than-normal construction timelines in several markets (as opposed to sales cancellations, which in aggregate were down slightly from a year ago). The combined order backlog for these builders at the end of last year was up 18.3% from a year earlier. Net orders per active community for the group were up 8.7% YOY.

	Net Orders			Settlements			Average Closing  Price ($000s)
Qtr. Ended:	12/15	12/14	% Chg	12/15	12/14	% Chg	12/15	12/14	% Chg
D.R. Horton	8,064	7,370	9.4%	8,061	7,973	1.1%	290	281	3.3%
PulteGroup	3,659	3,232	13.2%	5,662	5,316	6.5%	353	334	5.7%
NVR	3,100	2,713	14.3%	4,010	3,469	15.6%	382	376	1.6%
Beazer Homes	923	966	-4.5%	1,049	885	18.5%	321	296	8.6%
Meritage Homes	1,568	1,272	23.3%	1,919	1,863	3.0%	397	369	7.6%
MDC Holdings	1,020	887	15.0%	1,275	1,242	2.7%	435	397	9.5%
M/I Homes	897	773	16.0%	1,253	1,105	13.4%	360	322	11.8%
Total	19,231	17,213	11.7%	23,229	21,853	6.3%	343	326	5.4%

D.R. Horton reported that net orders for its “Express” brand, targeted for the “entry-level” home buyer, represented 25% of its total orders (in units) last quarter, compared to 13% in the comparable quarter of 2014, while the Express share of deliveries increased to 22% from 10%. The average selling price for Express deliveries last quarter was $199,400, compared to $168,900 a year earlier. A major reason for the sharp jump in the average Express selling price was an increase in the share of deliveries in higher-priced markets (including California).

While LGI Homes has not yet released its earnings report for last quarter, the company does release monthly home closings (in units). For the quarter ended December 31, 2015 LGI Home delivered 946 homes, up 45.1% from the comparable quarter of 2014. LGI had 54 active communities in December, up from 39 a year earlier. LGI focuses heavily (though not exclusively) on entry-level/first-time home buyers, and its average sales price in the quarter ended September 30, 2015 was about $186,000. LGI also reported that its home closings totaled 232 in January, up 51.6% from the previous January, and that it had 54 active communities in January compared to 42 a year ago.

Earlier this month the Commerce Department estimated that new single-family home sales last quarter totaled 112,000, up 7.7% from the comparable quarter of 2014.

by Calculated Risk on 2/04/2016 11:03:00 AM

Note: Yesterday I wrote: Preview: Employment Report for January

A few excerpts from a research piece by Goldman Sachs economist Daan Struyven:

January Payrolls Preview We expect a 170k gain in nonfarm payroll employment in January, below consensus expectations of 190k. ... We expect the unemployment rate to remain unchanged at 5.0% in January on a rounded basis ... However, we see some risk that the unemployment rate will round down to 4.9% given our expectation for a strong employment gain and the possibility of a slight decline in participation ...

We expect average hourly earnings for all workers to rise 0.4% (mom) in January following a 0.04% decline in December. Our expectation for a firmer than usual rise in average hourly earnings growth is primarily due to favorable calendar effects. In addition, we estimate that minimum wage increases in about a dozen states could boost aggregate average hourly earnings by about 0.05%. However, even a 0.4% increase in January would result in a decline in the year-on-year rate to 2.3% due to unfavorable base effects.

Struyven also mentions that the annual benchmark revision will be released tomorrow, and the revision will probably show about 200 thousand fewer jobs added over the last year than previously estimated. As I noted yesterday, the preliminary annual benchmark revision showed a downward adjustment of 208,000 jobs, and the preliminary estimate is usually pretty close to final revision.

by Calculated Risk on 2/04/2016 08:33:00 AM

The DOL reported:

In the week ending January 30, the advance figure for seasonally adjusted initial claims was 285,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 278,000 to 277,000. The 4-week moving average was 284,750, an increase of 2,000 from the previous week's revised average. The previous week's average was revised down by 250 from 283,000 to 282,750.

There were no special factors impacting this week's initial claims.

The previous week was revised down to 277,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

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 decreased to 284,750.

This was above the consensus forecast of 275,000. Although initial claims have increased recently, this is still a very low level and the 4-week average suggests few layoffs.

by Calculated Risk on 2/03/2016 06:36:00 PM

From Tim Duy: Resisting Change?

Bottom Line: Fischer is clearly less confident than earlier this month when he claimed that market participants were underestimating the pace of rate hikes. The baseline of four hikes is clearly is doubt; see here for my five potential scenarios. Financial market participants have almost completely discounted any rate hikes this year. This is a recession scenario that I am not enamored with. That said, I suspect market volatility and lack of inflation data keep them on hold in March and maybe April even if the recession does not come to pass. However (although not my baseline), I can tell a story where they feel like the employment data forces their hand. Especially so if they continue to downplay the inflation numbers. A substantial part of their policy still appears directed by a pre-conceived notion of "normal" policy. This I think is the Fed's largest error; the fact that the yield curve stubbornly resists being pushed higher suggests that the Fed's estimates of the terminal fed funds rates is wildly optimistic. There appear to be limits to which the Fed can resist the global pull of zero (or lower) rates.

Thursday:
• 8:30 AM ET, the initial weekly unemployment claims report will be released.  The consensus is for 280 thousand initial claims, up from 278 thousand the previous week.

• 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for December. The consensus is a 2.8% decrease in orders.

by Calculated Risk on 2/03/2016 04:47:00 PM

A few excerpts from a research piece by Goldman Sachs economists Jan Hatzius and Zach Pandl: Revising our Fed Call

We ... now expect the FOMC to keep policy rates unchanged at the March 15-16 meeting ... financial conditions have tightened meaningfully, and officials sound inclined to take more time ... We therefore expect the next rate increase in June, and see a total of three rate increases this year.

... our forecasts remain well-above market pricing, which now shows only about a 50% chance that the Fed raises rates at all this year, and a 25% chance that the committee lowers rates. The first full rate hike is not priced in until about August 2017.

by Calculated Risk on 2/03/2016 01:15:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for January. The consensus, according to Bloomberg, is for an increase of 188,000 non-farm payroll jobs in January (with a range of estimates between 170,000 to 215,000), and for the unemployment rate to be unchanged at 5.0%.

The BLS reported 292,000 jobs added in December.

Note on Revisions: With the January release, the BLS will introduce revisions to nonfarm payroll employment to reflect the annual benchmark adjustment. The preliminary annual benchmark revision showed a downward adjustment of 208,000 jobs, and the preliminary estimate is usually pretty close.

Here is a summary of recent data:

• The ADP employment report showed an increase of 205,000 private sector payroll jobs in January. This was above expectations of 190,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth above expectations.

• The ISM manufacturing employment index decreased in January to 45.9%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 40,000 in December. The ADP report indicated no change for manufacturing jobs.  Note: Recently the ADP has been a better predictor for BLS reported manufacturing employment than the ISM survey.

The ISM non-manufacturing employment index decreased in December to 52.1%. A historical correlation  between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 130,000 in January.

Combined, the ISM indexes suggests employment gains of 90,000.  This suggests employment growth below expectations.

• Initial weekly unemployment claims averaged close to 283,000 in January, up from 275,000 in December. For the BLS reference week (includes the 12th of the month), initial claims were at 294,000, up from 271,000 during the reference week in December.

The increase during the reference suggests more layoffs in January as compared to December.

• The final January University of Michigan consumer sentiment index decreased to 92.0 from the December reading of 92.6. Sentiment is frequently coincident with changes in the labor market, but there are other factors too - like lower gasoline prices.

• Conclusion: Unfortunately none of the indicators above is very good at predicting the initial BLS employment report.  However, based on these indicators, it appears job gains will be below consensus.

by Calculated Risk on 2/03/2016 10:06:00 AM

The January ISM Non-manufacturing index was at 53.5%, down from 55.8% in December. The employment index decreased in January to 52.1%, down from 56.3% in December. Note: Above 50 indicates expansion, below 50 contraction.

From the Institute for Supply Management: January 2016 Non-Manufacturing ISM Report On Business®

Economic activity in the non-manufacturing sector grew in January for the 72nd consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 53.5 percent in January, 2.3 percentage points lower than the seasonally adjusted December reading of 55.8 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 53.9 percent, which is 5.6 percentage points lower than the seasonally adjusted December reading of 59.5 percent, reflecting growth for the 78th consecutive month at a slower rate. The New Orders Index registered 56.5 percent, 2.4 percentage points lower than the seasonally adjusted reading of 58.9 percent in December. The Employment Index decreased 4.2 percentage points to 52.1 percent from the seasonally adjusted December reading of 56.3 percent and indicates growth for the 23rd consecutive month. The Prices Index decreased 4.6 percentage points from the seasonally adjusted December reading of 51 percent to 46.4 percent, indicating prices decreased in January for the third time in the last five months. According to the NMI®, 10 non-manufacturing industries reported growth in January. The majority of the respondents’ comments are positive about business conditions; however, there is a concern that exists relative to global conditions, stock market volatility, and the effect on commercial and consumer confidence."
emphasis added

Click on graph for larger image.

This graph shows the ISM non-manufacturing index (started in January 2008) and the ISM non-manufacturing employment diffusion index.

This was below the consensus forecast of 55.5 and suggests slower expansion in January than in December.

by Calculated Risk on 2/03/2016 08:15:00 AM

From ADP:

Private sector employment increased by 205,000 jobs from December to January according to the January 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.
...
Goods-producing employment rose by 13,000 jobs in January, well off from December’s upwardly revised 30,000. The construction industry added 21,000 jobs, which was roughly in line with the average monthly jobs gained during 2015. Meanwhile, manufacturing neither added nor lost jobs.

Service-providing employment rose by 192,000 jobs in January, down from an upwardly revised 237,000 in December. The ADP National Employment Report indicates that professional/business services contributed 44,000 jobs, down from 69,000 in December. Trade/transportation/utilities grew by 35,000, up slightly from a downwardly revised 33,000 the previous month. The 19,000 new jobs added in financial activities were the most in that sector since March 2006.
...
Mark Zandi, chief economist of Moody’s Analytics, said, “Job growth remains strong despite the turmoil in the global economy and financial markets. Manufacturers and energy companies are reducing payrolls, but job gains across all other industries remain robust. The U.S. economy remains on track to return to full employment by mid-year.”

This was above the consensus forecast for 190,000 private sector jobs added in the ADP report. 

The BLS report for January will be released Friday, and the consensus is for 188,000 non-farm payroll jobs added in January.

by Calculated Risk on 2/03/2016 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 January 29, 2016. The previous week’s results included an adjustment for the Martin Luther King holiday
...
The Refinance Index increased 0.3 percent from the previous week to its highest level since October 2015. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index increased 11 percent compared with the previous week and was 17 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to its lowest level since October 2015, 3.97 percent, from 4.02 percent, with points increasing to 0.41 from 0.40 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. This is the fourth straight weekly decrease for this rate.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000.

Refinance activity will probably stay low in 2016.



The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 17% higher than a year ago.

by Calculated Risk on 2/02/2016 05:48:00 PM

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

• 8:15 AM, the ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 190,000 payroll jobs added in January, down from 257,000 in December.

• 10:00 AM, the ISM non-Manufacturing Index for January. The consensus is for index to be increased to 55.5 in January from 55.3 in December.

From Matthew Graham at Mortgage News Daily: Mortgage Rates Down to New 8-Month Lows

Mortgage rates only paused for a brief moment of reflection yesterday before continuing with 2016's trend of improvement. Today's gains bring them easily back to new 8-month lows. Last Friday, that's a designation they shared with a few days in October. Today's rates don't need need to talk about sharing the trophy until we get all the way back to April 2015. The average lender is now easily down to conventional 30yr fixed rates of 3.75%. The stronger lenders have gradually been moving down to 3.625%.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

View More Refinance Rates