by Calculated Risk on 4/23/2018 04:48:00 PM

Update: Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

Here is a table from housing economist Tom Lawler showing the year-over-year (YoY) change for National inventory from the NAR, and the YoY change for California from the CAR.

It appears the YoY declines are slowing, and especially in California.

YOY % Change, Existing SF Homes for Sale
	NAR (National)	CAR (California)
Sep-17	-8.4%	-11.2%
Oct-17	-10.4%	-11.5%
Nov-17	-9.7%	-11.5%
Dec-17	-11.5%	-12.0%
Jan-18	-9.5%	-6.6%
Feb-18	-8.6%	-1.3%
Mar-18	-7.2%	-1.0%

The graph below shows the year-over-year change for non-contingent inventory in Las Vegas, Phoenix and Sacramento (through March), and also total existing home inventory as reported by the NAR (also through March 2018).

Click on graph for larger image.

This shows the year-over-year change in inventory for Phoenix, Sacramento, and Las Vegas.  The black line if the year-over-year change in inventory as reported by the NAR.

Note that inventory in Sacramento was up 19% year-over-year in March (inventory still very low), and has increased year-over-year for six consecutive months. 

Also note the inventory is still down sharply in Las Vegas (red), but the YoY decline has been getting smaller.

I'll try to add a few other markets.

Inventory is a key for the housing market, and I will be watching inventory for the impact of the new tax law and higher mortgage rates on housing.

by Calculated Risk on 4/23/2018 03:28:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in March were up 3.3% year-over-year (including homes, condos and manufactured homes).

2) Active inventory is now down 12.9% year-over-year. 

This is the seventeenth consecutive month with a YoY decrease in inventory.

March Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash Sales	Percent Cash	Active Inventory	YoY Change Inventory
Mar-08	4,303	---	822	19.1%	57,0811	---
Mar-09	7,636	77.5%	2,994	39.2%	49,743	-12.9%
Mar-10	8,969	17.5%	3,745	41.8%	42,755	-14.0%
Mar-11	9,927	10.7%	4,946	49.8%	37,632	-12.0%
Mar-12	8,868	-10.7%	4,222	47.6%	21,863	-41.9%
Mar-13	8,146	-8.1%	3,384	41.5%	20,729	-5.2%
Mar-14	6,708	-17.7%	2,222	33.1%	30,167	45.5%
Mar-15	7,884	17.5%	2,172	27.5%	26,623	-11.7%
Mar-16	8,555	8.5%	2,107	24.6%	27,580	3.6%
Mar-17	9,304	8.8%	2,226	23.9%	24,871	-9.8%
Mar-18	9,615	3.3%	2,435	25.3%	21,669	-12.9%
1 March 2008 probably included pending listings

by Calculated Risk on 4/23/2018 01:03:00 PM

Earlier: NAR: "Existing-Home Sales Climb 1.1 Percent in March"

A few key points:

1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus. See: Lawler: Early Read on Existing Home Sales in March.

2) Inventory is still very low and falling year-over-year (down 7.2% year-over-year in March). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.    This was the 34th consecutive month with a year-over-year decline in inventory.

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

Click on graph for larger image.

Sales NSA in March (434,000, red column) were above sales in March 2017 (355,000, NSA).

Sales through March are down about 2% from the same period in 2017.   This is a small decline - and it is too early to tell if there is an impact from higher interest rates and / or the changes to the tax law on home sales.

by Calculated Risk on 4/23/2018 10:12:00 AM

From the NAR: Existing-Home Sales Climb 1.1 Percent in March

Existing-home sales grew for the second consecutive month in March, but lagging inventory levels and affordability constraints kept sales activity below year ago levels, according to the National Association of Realtors®.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, rose 1.1 percent to a seasonally adjusted annual rate of 5.60 million in March from 5.54 million in February. Despite last month's increase, sales are still 1.2 percent below a year ago.
...
Total housing inventory at the end of March climbed 5.7 percent to 1.67 million existing homes available for sale, but is still 7.2 percent lower than a year ago (1.80 million) and has fallen year-over-year for 34 consecutive months. Unsold inventory is at a 3.6-month supply at the current sales pace (3.8 months a year ago).
emphasis added

Click on graph for larger image.

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

Sales in March (5.60 million SAAR) were 1.1% higher than last month, but were 1.2% below the March 2017 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.67 million in March from 1.59 million in February.   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 last 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 7.2% year-over-year in March compared to March 2017.  

Months of supply was at 3.6 months in March.

Sales were above the consensus view. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...

by Calculated Risk on 4/23/2018 08:36:00 AM

From the Chicago Fed: Index points to a moderation in economic growth in March

Led by slower growth in production- and employment-related indicators, the Chicago Fed National Activity Index (CFNAI) declined to +0.10 in March from +0.98 in February. Three of the four broad categories of indicators that make up the index decreased from February, but two of the four categories made positive contributions to the index in March. The index’s three-month moving average, CFNAI-MA3, decreased to +0.27 in March from +0.31 in February.
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 February (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 4/22/2018 08:34:00 PM

Weekend:
• Schedule for Week of Apr 22, 2018

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

• At 10:00 AM, Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.28 million SAAR, down from 5.54 million in February. Housing economist Tom Lawler estimates the NAR will reports sales of 5.51 million SAAR for March.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 16, and DOW futures are down 138 (fair value).

Oil prices were up over the last week with WTI futures at $68.22 per barrel and Brent at $73.91 per barrel.  A year ago, WTI was at $49, and Brent was at $50 - so oil prices are up about 40% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.76 per gallon. A year ago prices were at $2.42 per gallon - so gasoline prices are up 34 cents per gallon year-over-year.

by Calculated Risk on 4/22/2018 11:53:00 AM

A few brief excerpts from a note by Goldman Sachs economist David Mericle:

... Are we really at full employment? Won’t job growth naturally slow down soon? Why is wage growth so much lower than in previous expansions? ...

We now see the labor market as at or a bit beyond full employment. ... we estimate a structural unemployment rate of about 4.5%, modestly above the current 4.1% rate. While the cyclical participation gap has recovered more slowly, it too now appears closed. A further cyclical boost to participation is possible, but we expect it to be quite limited.

Meanwhile, the pace of job creation shows no sign of slowing. ... We see little evidence that supply constraints will impose a forceful natural deceleration any time soon, and instead expect robust labor demand to drive the unemployment rate to 3.6% by end-2018 and 3.3% by end-2019, the lowest rate since the Korean War.

We have long stressed that wage growth expectations need to be recalibrated to the meager rate of productivity growth seen this cycle, implying a full employment rate of wage growth of roughly 3%. ... our wage tracker, now running at 2.5%, looks only moderately disappointing. ... signs of acceleration are emerging, notably in our wage survey leading indicator, now running at 3.2% ...

Mericle argues that the US economy is at or close to "full employment", that job gains will remain healthy for some time, and that wage growth is only "moderately disappointing".

by Calculated Risk on 4/21/2018 08:11:00 AM

The key economic reports this week are the advance estimate of Q1 GDP, March new and existing home sales, and Case-Shiller house prices.

----- Monday, Apr 23rd -----
8:30 AM ET: Chicago Fed National Activity Index for March. This is a composite index of other data.

10:00 AM: Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.28 million SAAR, down from 5.54 million in February.

The graph shows existing home sales from 1994 through the report last month.

Housing economist Tom Lawler estimates the NAR will reports sales of 5.51 million SAAR for March.

----- Tuesday, Apr 24th -----
9:00 AM ET: S&P/Case-Shiller House Price Index for February.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the January 2018 report (the Composite 20 was started in January 2000).

The consensus is for a 6.2% year-over-year increase in the Comp 20 index for February.

9:00 AM: FHFA House Price Index for February 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

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

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

The consensus is for 630 thousand SAAR, up from 618 thousand in February.

10:00 AM ET: Richmond Fed Survey of Manufacturing Activity for April.

----- Wednesday, Apr 25th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, Apr 26th -----
8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 230 thousand initial claims, down from 232 thousand the previous week.

8:30 AM: Durable Goods Orders for March from the Census Bureau. The consensus is for a 1.7% increase in durable goods orders.

10:00 AM: the Q1 2018 Housing Vacancies and Homeownership from the Census Bureau.

11:00 AM: the Kansas City Fed manufacturing survey for March.

----- Friday, Apr 27th -----
8:30 AM: Gross Domestic Product, 1st quarter 2018 (Advance estimate). The consensus is that real GDP increased 2.0% annualized in Q1, down from 2.9% in Q4.

10:00 AM: University of Michigan's Consumer sentiment index (Final for April). The consensus is for a reading of 98.0, up from 97.8..

by Calculated Risk on 4/20/2018 05:41:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on Apr 20, 2018:

• Total US oil rigs were up, +5 to 820

• Horizontal oil rigs were up,+6 at 723
...
• Almost all the action was back in the Permian, +9 horizontal oil rigs

• The breakeven oil price to add rigs appears to have crept up from around $48 WTI late last year, to about $56 WTI now.

• The Brent spread remains above $5 / barrel

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 4/20/2018 01:57:00 PM

The advance Q1 GDP report will be released next Friday, April 27th.   The consensus is for real GDP growth of 2.1% on a seasonally adjusted annual rate (SAAR) basis.

Here are four Q1 GDP forecast.

From Merrill Lynch:

We expect real GDP growth to slow to 1.7% qoq saar in the advance 1Q report [April 20 estimate].

From Nomura:

We expect the first reading of Q1 real GDP growth to come in at 1.6% q-o-q saar [April 20 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2018 is 2.0 percent on April 17, up from 1.9 percent on April 16. [April 17 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.9% for 2018:Q1 and 3.0% for 2018:Q2. [April 20 estimate]

CR Note: It looks like another quarter around 2% or so, although there might still be some residual seasonality in the first quarter.