by Calculated Risk on 3/22/2016 07:03:00 PM

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

• At 10:00 AM, New Home Sales for February from the Census Bureau. The consensus is for an increase in sales to 510 thousand Seasonally Adjusted Annual Rate (SAAR) in February from 494 thousand in January.

• During the day: The AIA's Architecture Billings Index for February (a leading indicator for commercial real estate).

by Calculated Risk on 3/22/2016 01:49:00 PM

Here is an indicator that I'm following that appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Expands in March

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), expanded 0.1 percent in March following a revised 0.2 percent decline in February and 0.1 percent downward revision in January. All data is measured on a three-month moving average (3MMA). Accounting for adjustments, the CAB remains up 1.5 percent over this time last year, a marked deceleration of activity from one year ago when the barometer logged a 2.7 percent year-over-year gain from 2014.
...
Applying the CAB back to 1919, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added

Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

Currently CAB is up slightly year-over-year, and this suggests a slight increase in Industrial Production over the next year is possible.

by Calculated Risk on 3/22/2016 10:06:00 AM

From the Richmond Fed: Manufacturing Sector Activity Expanded; New Orders and Shipments Increased

Fifth District manufacturing activity expanded in March, according to the most recent survey by the Federal Reserve Bank of Richmond. Shipments and the volume of new orders increased this month. Employment advanced at a slightly faster pace in March, while average wages grew moderately and the average workweek lengthened. Prices of raw materials and finished goods rose at a faster pace compared to last month.

Overall, manufacturing activity increased markedly in March. The composite index for manufacturing climbed to a reading of 22, the highest since April 2010. The index for shipments added 38 points and the new orders index advanced 30 points, finishing at strong readings of 27 and 24, respectively. Manufacturing employment grew at a slightly faster pace this month; the employment indicator added two points to end at 11.
emphasis added

Based on the regional surveys released so far for March, it seems likely the ISM manufacturing index will suggest expansion in March after five months of contraction.

by Calculated Risk on 3/22/2016 08:11:00 AM

From housing economist Tom Lawler:

CR Update: Added Census Bureau discussion of square footage at bottom.

While single-family housing production has continued to recover, the overall level of production – in terms of units – has been well short of consensus forecasts from a few years ago. In looking at the production “shortfall,” the one thing that is striking is that production of moderately sized homes has barely recovered from the cyclical lows, while production of big homes (3000+ square feet) has been running at a higher pace that in all but one year of the 1990’s.

Click on graph for larger image.

Before going into the distribution of single-family housing production by square feet of floor area, here is a chart of the median square feet of floor area by year for single-family housing completions from 1971 through 2015.

While Census has not yet released its annual report on the characteristics of new single-family home completions for 2015, both the median and the average square footage for completions were similar to 2014, and as such it’s probably not unreasonable to assume that the distribution of single-family completions by square feet of floor area was also similar.

It is a little tricky to look at the distribution of single-family housing completions over long periods of time, because (1) Census only provides annual data by broad ranges, and (2) Census has changed those ranges over time. However, looking at various relationships, and taking advantage of the fact that there is a five-year period where data are available for both the “old” and the “new” ranges, it is possible to construct reasonable estimates of production by constant ranges over time. Here is a chart based on such estimates.

And here are these estimates by averages for five-year periods, as well as for each of the last five years.

Single-Family Housing Completions by Square Feet of Floor Area (000's, Average per Year)
	<1600	1600-1999	2000-2399	2400-2999	3000+	Total
1971-1975	602	129	195	74	37	1,038
1976-1980	573	236	209	107	59	1,184
1981-1985	462	183	107	90	53	894
1986-1990	411	233	169	141	109	1,064
1991-1995	314	231	177	157	134	1,013
1996-2000	321	265	215	194	188	1,183
2001-2005	315	298	258	262	294	1,427
2006-2010	189	185	162	173	232	941
2011	98	84	70	79	116	447
2012	93	89	80	93	128	483
2013	89	102	97	115	166	569
2014	90	104	102	131	193	620
2015	96	109	106	136	200	647

And here’s a comparison of single-family housing completions by square footage for the last two years compared to the average of the 1990’s.

Single-Family Housing Completions by Square Feet of Floor Area (000's, Average per Year)
	<1600	1600-1999	2000-2399	2400-2999	3000+	Total
1990-1999 Average	319	242	189	170	151	1,070
2014-2015 Average	93	107	104	134	197	634
% Change	-70.8%	-55.9%	-45.0%	-21.5%	30.1%	-40.8%

And here’s a fun stat.

Estimated Single-Family Homes Completed with Square Footage of 3,000 or More

1971-1995 (25 years): 1.962 million

2001-2008 (8 years): 2.399 million.

Update: From Census:

"For these statistics, floor area is defined as all completely finished floor space, including space in basements and attics with finished walls, floors, and ceilings. This does not include a garage, carport, porch, unfinished attic or utility room, or any unfinished area of the basement.

In concept, measurement is based on exterior dimensions. Measurements are taken to the outside of exterior walls for detached houses. Builders sometimes provide the gross square footage (based on exterior dimensions) of a detached structure. This footage usually does not contain unfinished space. However, in townhouses, the gross square footage often includes the whole lower level, even though that area might include a garage and unfinished rooms. For purposes of these statistics, where the floor area for a new house was reported based on interior dimensions, the figure is converted to exterior dimensions by multiplying by a standard conversion factor of 1.08. A standard conversion factor of 1.04 is used to convert figures to exterior dimensions where it was not known whether the reported area was based on exterior or interior dimensions."

by Calculated Risk on 3/21/2016 03:52:00 PM

From housing economist Tom Lawler: NAR: Home Sales “Fizzled” in February: Northeast Estimate “Looks Low”

In a report released this morning, the National Association of Realtors estimated that US existing home sales ran at a seasonally adjusted annual rate of 5.08 million in February, down 7.1% from January’s pace and up 2.2% from last February’s pace. The NAR’s estimate for unadjusted home sales last month was 6.4% higher than a year earlier. The NAR’s estimate for home sales was slightly lower my below-consensus projection based on regional tracking. In looking at the NAR’s regional estimates, the YOY increases in sales seem “reasonable” in all areas save for the Northeast, where local realtor/MLS reports suggest a significantly higher YOY gain than that shown by the NAR. I would expect the NAR to revise upward home sales for the Northeast in next month’s report, though the pace of national home sales would still be well below the “consensus” projection.

CR Note: Tom Lawler also sent me the table below of short sales, foreclosures and all cash sales for a several selected cities in February.

On distressed: Total "distressed" share is down in all of these markets.

The All Cash Share (last two columns) is mostly declining year-over-year. As investors pull back, the share of all cash buyers will probably continue to decline.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Feb- 2015	Feb- 2014	Feb- 2015	Feb- 2014	Feb- 2015	Feb- 2014	Feb- 2015	Feb- 2014
Las Vegas	6.6%	9.7%	8.6%	9.7%	15.2%	19.4%	31.4%	37.4%
Reno**	4.0%	7.0%	4.0%	7.0%	8.0%	14.0%
Phoenix							29.0%	29.9%
Sacramento	4.5%	6.3%	5.2%	8.6%	9.7%	14.9%	22.9%	19.8%
Minneapolis	3.2%	2.8%	13.0%	15.6%	16.2%	18.4%
Mid-Atlantic	4.5%	5.3%	15.8%	15.1%	20.3%	20.4%	22.3%	21.2%
Bay Area CA*	2.7%	3.5%	3.0%	3.8%	5.7%	7.3%	24.8%	25.6%
Riverside	2.5%	2.9%	4.1%	6.0%	6.6%	8.9%	19.3%	21.4%
San Bernardino	2.9%	3.1%	4.8%	6.8%	7.7%	9.9%	23.7%	26.1%
So. California*	3.2%	4.3%	4.5%	5.7%	7.7%	10.0%	25.1%	26.8%
Bay Area CA*	2.7%	3.5%	3.0%	3.8%	5.7%	7.3%	24.8%	25.6%
Florida SF	3.3%	5.0%	14.3%	24.1%	17.7%	29.1%	36.6%	42.3%
Florida C/TH	1.9%	2.9%	11.2%	19.0%	13.1%	21.8%	63.4%	69.4%
Chicago (city)					22.9%	29.9%
Florida SF	3.3%	5.0%	14.3%	24.1%	17.7%	29.1%	36.6%	42.3%
Florida C/TH	1.9%	2.9%	11.2%	19.0%	13.1%	21.8%	63.4%	69.4%
Northeast Florida					26.3%	37.5%
Chicago (city)					22.9%	29.9%
Toledo							38.7%	38.9%
Knoxville							24.3%	23.9%
Tucson							30.1%	33.7%
Georgia***							23.7%	27.1%
Omaha							21.3%	19.6%
Pensacola							31.3%	36.7%
Rhode Island					14.5%	21.4%
Richmond VA			15.4%	13.9%
Memphis			16.8%	17.6%
Springfield IL**			16.5%	14.6%
*share of existing home sales, based on property records **Single Family Only ***GAMLS

by Calculated Risk on 3/21/2016 12:18:00 PM

As expected on this blog, existing home sales declined more in February than the consensus forecast.

Going forward, there are some economic reasons for some softness in existing home sales in certain areas. Low inventory is probably holding down sales in many areas, and there will be weakness in some oil producing areas (see: Houston has a problem).

It is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.  So some slowing for existing home sales is not a big deal for the economy.

Earlier: Existing Home Sales decreased in February to 5.08 million SAAR

I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 1.1% year-over-year in February). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

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

Click on graph for larger image.

Sales NSA in February (red column) were the highest since February 2007 (NSA).

Note that January and February are usually the slowest months of the year.

by Calculated Risk on 3/21/2016 10:11:00 AM

From the NAR: Existing-Home Sales Fizzle in February

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 7.1 percent to a seasonally adjusted annual rate of 5.08 million in February from 5.47 million in January. Despite last month's large decline, sales are still 2.2 percent higher than a year ago. ...

Total housing inventory at the end of February increased 3.3 percent to 1.88 million existing homes available for sale, but is still 1.1 percent lower than a year ago (1.90 million). Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.0 months in January.

Click on graph for larger image.

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

Sales in February (5.08 million SAAR) were 7.1% lower than last month, and were 2.2% above the February 2015 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.88 million in February from 1.82 million in January.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The third 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 1.1% year-over-year in February compared to February 2015.  

Months of supply was at 4.4 months in February.

This was well below consensus expectations of sales of 5.34 million. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

by Calculated Risk on 3/21/2016 08:36:00 AM

The Chicago Fed released the national activity index (a composite index of other indicators): Index shows economic growth slowed in February

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) fell to –0.29 in February from +0.41 in January. All four broad categories of indicators that make up the index decreased from January, and three of the four categories made negative contributions to the index in February.

The index’s three-month moving average, CFNAI-MA3, edged up to –0.07 in February from –0.12 in January. February’s CFNAI-MA3 suggests that growth in national economic activity was slightly below its historical trend. The economic growth reflected in this level of the CFNAI-MA3 suggests subdued inflationary pressure from economic activity over the coming year.
emphasis added

This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

Click on graph for larger image.

This suggests economic activity was slightly below the historical trend in February (using the three-month average).

According to the Chicago Fed:

What is the National Activity Index? The index is a weighted average of 85 indicators of national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.

A zero value for the index indicates that the national economy is expanding at its historical trend rate of growth; negative values indicate below-average growth; and positive values indicate above-average growth.

by Calculated Risk on 3/20/2016 08:05:00 PM

Note: I'd take the "under" on existing home sales tomorrow. Housing economist Tom Lawler is not always right on, but he is usually pretty close - and he expects the NAR to report February sales of 5.20 million SAAR, below the consensus forecast of 5.34 million SAAR. See this post for a review of Lawler's track record.

Weekend:
• Schedule for Week of March 20, 2016

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for February. This is a composite index of other data.

• At 10:00 AM, Existing Home Sales for February from the National Association of Realtors (NAR). The consensus is for 5.34 million SAAR, down from 5.47 million in January. Housing economist Tom Lawler expects the NAR to report sales of 5.20 million SAAR for February.

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

Oil prices were up over the last week with WTI futures at $39.05 per barrel and Brent at $41.11 per barrel.  A year ago, WTI was at $46, and Brent was at $53 - so prices are down about 15% to 22% year-over-year, respectively.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $1.99 per gallon (down about $0.40 per gallon from a year ago).

by Calculated Risk on 3/20/2016 10:53:00 AM

Mortgage rates are still solidly below 4%.

From Matthew Graham at Mortgage News Daily: Mortgage Rates End Week at Lows

While we're not quite back to the lower rates seen earlier in the month, the average conventional 30yr fixed quote is still well below 4.0 percent, with the average lender at 3.75% on top tier scenarios.
emphasis added

Here is a table from Mortgage News Daily:

Home Loan Rates

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