by Calculated Risk on 2/26/2018 01:25:00 PM

New home sales for January were reported at 593,000 on a seasonally adjusted annual rate basis (SAAR). This was below the consensus forecast, however the three previous months were revised up.

I wouldn't read too much into one month of sales, especially in January. January is usually one of the weakest months of the year for new home sales, on a not seasonally adjusted (NSA) basis - and poor weather this year might have impacted sales a little more than usual. I'd like to see data for February and March before blaming higher interest rates, or a negative impact from the new tax law, as the cause of slower sales.

Earlier: New Home Sales decrease to 593,000 Annual Rate in January.

Click on graph for larger image.

This graph shows new home sales for 2017 and 2018 by month (Seasonally Adjusted Annual Rate).

Sales were down 1% year-over-year in January. No worries - yet!

And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years.

The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through January 2018. This graph starts in 1994, but the relationship had been fairly steady back to the '60s.

Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes.

I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales.

However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

by Calculated Risk on 2/26/2018 11:46:00 AM

Note: I follow several house price indexes (Case-Shiller, CoreLogic, Black Knight, Zillow, FHFA and more). Note: Black Knight uses the current month closings only (not a three month average like Case-Shiller or a weighted average like CoreLogic), excludes short sales and REOs, and is not seasonally adjusted.

From Black Knight: Black Knight HPI: U.S. Home Prices Ended 2017 Up 6.62 Percent from Start of Year, Gaining 0.1 Percent in December

• U.S. home prices edged up slightly in December, closing the year 6.6 percent above end of 2016

• December marked 68 consecutive months of annual home price appreciation

• New York once again led all states in monthly gains, with home prices up 1.71 percent over last month
...
• Home prices fell in nine of the nation’s 20 largest states, while six others hit new peaks

• Likewise, while 11 of the 40 largest metros hit new home price peaks in December, prices fell in another 20

Once again, this index is Not seasonally adjusted, and seasonally declines in some states is expected (so don't read too much into any regional declines).  The year-over-year increase in this index has been about the same for the last year (close to 6% range).

Note also that house prices are above the bubble peak in nominal terms, but not in real terms (adjusted for inflation).  Case-Shiller for December will be released tomorrow.

by Calculated Risk on 2/26/2018 10:12:00 AM

The Census Bureau reports New Home Sales in January were at a seasonally adjusted annual rate (SAAR) of 593 thousand.

The previous three months were revised up.

"Sales of new single-family houses in January 2018 were at a seasonally adjusted annual rate of 593,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 7.8 percent below the revised December rate of 643,000 and is 1.0 percent below the January 2017 estimate of 599,000."
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the last several years, new home sales are still somewhat low historically.

The second graph shows New Home Months of Supply.

The months of supply increased in January to 6.1 months from 5.5 months in December.

The all time record was 12.1 months of supply in January 2009.

This is at the top end of the normal range (less than 6 months supply is normal).

"The seasonally-adjusted estimate of new houses for sale at the end of January was 301,000. This represents a supply of 6.1 months at the current sales rate. "

On inventory, according to the Census Bureau:

"A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In January 2018 (red column), 43 thousand new homes were sold (NSA). Last year, 45 thousand homes were sold in January.

The all time high for December was 92 thousand in 2005, and the all time low for December was 21 thousand in 2011.

This was below expectations of 600,000 sales SAAR, however the previous months combined were revised up. I'll have more later today.

by Calculated Risk on 2/26/2018 08:38:00 AM

From the Chicago Fed: Index Points to Little Change in Economic Growth in January

The Chicago Fed National Activity Index (CFNAI) ticked down to +0.12 in January from +0.14 in December.
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 above the historical trend in January (using the three-month average).

According to the Chicago Fed:

The index is a weighted average of 85 indicators of growth in 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 monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.

by Calculated Risk on 2/25/2018 06:23:00 PM

Weekend:
• Schedule for Week of Feb 25, 2018

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

• 10:00 AM, New Home Sales for January from the Census Bureau. The consensus is for 600 thousand SAAR, down from 625 thousand in December.

• 10:30 AM, Dallas Fed Survey of Manufacturing Activity for February.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 5, and DOW futures are up 74 (fair value).

Oil prices were up over the last week with WTI futures at $63.57 per barrel and Brent at $67.27 per barrel.  A year ago, WTI was at $54, and Brent was at $55 - so oil prices are up solidly year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.51 per gallon. A year ago prices were at $2.29 per gallon - so gasoline prices are up 22 cents per gallon year-over-year.

by Calculated Risk on 2/25/2018 10:40:00 AM

Note: Surferdude808 compiles an unofficial list of Problem Banks compiled only from public sources.

Here is the unofficial problem bank list for February 2018.

Here are the monthly changes and a few comments from surferdude808:

Update on the Unofficial Problem Bank List for February 2018. The list had no removals or additions during the month, so the number of insured institutions on it remains at 101. However, aggregate assets had a small decline of $224 million to $20.5 billion as assets were updated with year-end figures. A year ago, the list held 155 institutions with assets of $41.8 billion. The FDIC will release industry results for the fourth quarter and provide an update on the Official Problem Bank list on February 27th.

by Calculated Risk on 2/24/2018 08:11:00 AM

The key economic reports this week are the second estimate of Q4 GDP, January new home sales, February auto sales, and the December Case-Shiller house price index.

For manufacturing, the February ISM manufacturing index, and the February Richmond Fed and Dallas Fed manufacturing surveys will be released this week.

Also, the new Fed Chair, Jerome Powell, will deliver the Semiannual Monetary Policy Report to the Congress.

----- Monday, Feb 26th -----
8:30 AM ET: Chicago Fed National Activity Index for January. This is a composite index of other data.

10:00 AM: New Home Sales for January from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the December sales rate.

The consensus is for 600 thousand SAAR, down from 625 thousand in December.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for February.

----- Tuesday, Feb 27th -----
8:30 ET AM: Durable Goods Orders for January from the Census Bureau. The consensus is for a 0.2% decrease in durable goods orders.

9:00 AM ET: S&P/Case-Shiller House Price Index for December.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the October 2017 report (the Composite 20 was started in January 2000).

The consensus is for a 6.3% year-over-year increase in the Comp 20 index for December.

9:00 AM: FHFA House Price Index for December 2017. This was originally a GSE only repeat sales, however there is also an expanded index.

10:00 AM: Fed Chair Jerome Powell Testimony, Semiannual Monetary Policy Report to the Congress, Before the House Financial Services Committee, Washington, D.C.

10:00 AM ET: Richmond Fed Survey of Manufacturing Activity for February. This is the last of the regional surveys for February.

----- Wednesday, Feb 28th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Gross Domestic Product, 4th quarter 2017 (Second estimate). The consensus is that real GDP increased 2.5% annualized in Q4, down from the advance estimate of 2.6%.

9:45 AM: Chicago Purchasing Managers Index for February. The consensus is for a reading of 65.0, down from 65.7 in January.

10:00 AM: Pending Home Sales Index for January. The consensus is for a 0.5% increase in the index.

----- Thursday, Mar 1st -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, up from 222 thousand the previous week.

8:30 AM: Personal Income and Outlays for January. The consensus is for a 0.3% increase in personal income, and for a 0.2% increase in personal spending. And for the Core PCE price index to increase 0.3%.

10:00 AM: ISM Manufacturing Index for February. The consensus is for the ISM to be at 58.6, down from 59.1 in January.

Here is a long term graph of the ISM manufacturing index.

The ISM manufacturing index indicated expansion in December. The PMI was at 59.1% in January, the employment index was at 54.2%, and the new orders index was at 65.4%.

10:00 AM: Construction Spending for January. The consensus is for a 0.3% increase in construction spending.

10:00 AM: Fed Chair Jerome Powell Testimony, Semiannual Monetary Policy Report to the Congress, Before the Senate Banking Committee, Washington, D.C

All day: Light vehicle sales for February. The consensus is for light vehicle sales to be 17.2 million SAAR in February, up from 17.1 million in January (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the January sales rate.

----- Friday, Mar 2nd -----
10:00 AM: University of Michigan's Consumer sentiment index (preliminary for February). The consensus is for a reading of 99.5, down from 99.9 in January.

by Calculated Risk on 2/23/2018 07:05:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Feb 23, 2018:

• Total US oil rigs took an anticipated breather this week, +1 to 799

• Horizontal oil rigs were up, +1 to 697
...
• The oil price continues to recover

• If rig count additions continue on our forecast trajectory, expect this to weigh on sentiment during March, particularly if supply gains surprise to the upside

Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

by Calculated Risk on 2/23/2018 03:58:00 PM

From housing economist Tom Lawler: Census: Population Growth Slowed Slightly in 2017: Immigration Uncertainty Clouds Outlook

At the end of last year the Census Bureau released its estimate of the US population for July 1, 2017 and its updated estimates for previous years (the so-called “Vintage 2017” estimates). As of July 1, 2017 Census estimated that the US resident population totaled 325,719,178, up 2,313,062 (or 0.71%) from the upwardly-revised estimate for July 1, 2016. The estimated population increase for 2017 was slightly lower than the 2,366,096 estimated gain in 2016, reflecting slightly lower estimated births, slightly higher estimated deaths, and slightly lower net international migration. Revised population estimates for previous years mainly reflected revised estimates of net international migration, which were driven by an updated methodology for estimating foreign-born emigration and net native-born migration. Below is a table comparing Vintage 2017 population estimates compared to the Vintage 2015 and the Vintage 2016 estimates. The Vintage “estimates” for the subsequent year reflect near-term projections for each Vintage.

Estimated US Resident Population
	Vintage 2015	Vintage 2016	Vintage 2017
7/1/2010	309,346,863	309,348,193	309,339,421
7/1/2011	311,718,857	311,663,358	311,644,280
7/1/2012	314,102,623	313,998,379	313,993,272
7/1/2013	316,427,395	316,204,908	316,234,505
7/1/2014	318,907,401	318,563,456	318,622,525
7/1/2015	321,418,820	320,896,618	321,039,839
7/1/2016	323,889,854	323,127,513	323,405,935
7/1/2017		325,344,115	325,719,178
7/1/2018			328,033,240

While Census had originally planned to release updated long-term population projections in December (the last long-term population projections report was released at the end of 2014 with “Vintage 2013” as a starting point), “senior officials” delayed the updated population release until sometime in March. Many analysts use these population projections to project such things as labor force growth, household growth, etc. Unfortunately, the Census population projections from 2014 are woefully out of date. Amazingly, however, some analysts still use these old projections. E.g., in October of last year the Bureau of Labor Statistics produced updated labor force projections over the next decade based on the outdated Census population projections. Since, as discussed later, the Census 2014 population projections significantly overstated not just actual population growth but likely population growth over the next few years, projection of key economic variables based on these outdated population forecasts are of little use to anyone.

Below is a table showing the US resident population projections from the Census 2014 projections compared to the Vintage 2017 estimates.

	Vintage 2017	Census 2014 Projections	Difference
7/1/2014	318,622,525	318,748,017	-125,492
7/1/2015	321,039,839	321,368,864	-329,025
7/1/2016	323,405,935	323,995,528	-589,593
7/1/2017	325,719,178	326,625,791	-906,613
7/1/2018	328,033,240	329,256,465	-1,223,225

As the table indicates, the Census 2014 population projection for 2017 were 906,613 higher than the latest 2017 estimate, and the projection for 2018 was 1,223,225 above the latest short-term forecast.

For 2017, here is a breakdown of the 2014 projections’ “component of change” assumptions for 2014 through 2017 compared to the Vintage 2017’s estimates.

Cumulative Components of Change from 7/1/2013 to 7/1/2017
	Vintage 2017	Census 2014 Projections	Difference
Births	15,864,285	16,050,287	-186,002
Deaths	10,755,028	10,532,454	222,574
Net International Migration	4,375,416	4,979,119	-603,703
Components of Change	9,484,673	10,496,952	-1,012,279
7/1/2013 Starting Point	316,234,505	316,128,839	105,666
7/1/2017 Population	325,719,178	326,625,791	-906,613

As the table indicates, over the 2014 through 2017 period births were lower, deaths were higher, and net international migration was significantly lower (according to the latest estimates) than the assumptions made in the Census 2014 population projections.

While Census has not yet released the Vintage 2017 population estimates by detailed age (these estimates probably won’t be available until June), the 7/1/2017 estimate of the US resident “adult” (18+) population is 252,063,800, or 778,438 below the projection for that date from the Census 2014 population projection report.

For the 2014 to 2017 period (using “actual” labor force participation rates), US labor force growth was about 0.1% per year lower than would have been the case if the Census 2014 population projections had been accurate. Over than same period my “best guess” is that US household growth over than period was about 118,000 lower than would have been the case if the Census 2014 population projections had been accurate. I use the term “best guess” because there are no reliable estimates of the number of US households for that period. (The so-called “household estimate conundrum.”)

The gap between Census 2014 population projections and likely “actual” population counts will almost certainly widen over the next few years, partly because of higher death rates but mainly because the Census 2014 assumptions on net international migration over the next few years seem way too high given the current political climate. As the chart below shows, the Census 2014 population projections assumed that net international immigration would be substantially higher over the 2018-2020 period than was the case over the past several years. Given the current political climate, such an assumption seems very unrealistic.

Click on graph for larger image.


On the immigration assumption front, my “gut” tells me that a major reason Census officials delayed the release of new long-term population projections is that it is far from clear how to assess what immigration numbers are likely to look like under an Administration that has expressed its support for legislation that would sharply reduce immigration. It also is a sensitive political topic, and it seems doubtful that Census officials would want to put out “official” government projections that showed rising net immigration numbers. I’m guessing that when Census finally releases its updated population projections, it will show different immigration scenarios, as they did in the 2012 population projection release, but I also believe that its “base’ or “middle net international migration scenario will show considerable lower numbers than those in the 2014 projections.

For analysts wishing to make economic projections that are dependent on population projections, there a few choices: (1) forego making any projections until Census releases its updated population forecasts, which is tentatively scheduled for release sometime next month; (2) make their own population projections based on their own assumptions about births, deaths, and (especially) net international migration; or (3) (NOT RECOMMENDED) continue the use the outdated Census 2014 population projections because, well, er, they are the last officially released projections!

When the Census’ new long-term population projections are released (again, probably next month), there are a few things analysts should take into account before using them as inputs to other economic/demographic variables. First, of course, analysts should look closely at the underlying assumptions in the projections, and make an assessment of whether they are “reasonable” (with special attention to the assumptions on net international migration). Second, it is highly likely that the “starting point” for Census’ updated population projections will be the “Vintage 2016” population estimate for July 1, 2016. As noted in the table on page one, the population estimate for this date was revised upward at the end of last year by 278,782. As such, rigorous analysts will need to adjust the Census projections to reflect these updated estimates, and may also want to adjust the Census projections to reflect their own views of the key components of change (again, especially with respect to net international migration).

Net, of course, the updated long-term Census population projections released (probably) next month are likely to show SUBSTANTIALLY slower projected population growth than the Census 2014 projections, and folks who only use “official” Census population projections to forecast such things as labor force growth and household formations will show substantially slower growth in these variables from their previous forecasts.

by Calculated Risk on 2/23/2018 12:05:00 PM

During the housing bubble and subsequent bust, I noted that the median house price could be distorted by the mix of houses sold. I preferred to use the repeat sales indexes from the FHFA, Case-Shiller and Corelogic (and others).

Now that most of the distortion from the bubble is behind us, I thought I'd take a look at the median (and mean) house price data for existing home sales from the NAR, compared to the Case-Shiller National index.

The first graph show the NAR existing home sales median and mean prices since 1999 (Not Seasonally Adjusted), compared to Case-Shiller (Seasonally Adjusted).

Click on graph for larger image.

The median and mean house prices showed less of an increase in prices during the bubble (this was the distortion I discussed back in 2005 and 2006).

Now it appears the median and mean prices are pretty much tracking the Case-Shiller index.

The second graph show the same data on a year-over-year basis.

On a year-over-year basis, the mean and median track Case-Shiller pretty closely.

The Case-Shiller National Index was up 6.2% in November.

The NAR median price was up 5.8% in January, and the mean price was up 4.7%.

I still prefer the repeat sales indexes, but I think the NAR prices are also useful.

The third graph shows the NAR existing home median prices, the Census Bureau's new home median prices, and the Case-Shiller national index.

As has been widely reported, the new home builders have been focused on higher priced homes - and this is clear in the house price data.

Compared to the bubble peak, the NAR median price is up 4.4%, the Case-Shiller index is up 6.4%, however new home median prices are up 27.5%!