by Calculated Risk on 6/21/2019 10:09:00 AM

From the NAR: Existing-Home Sales Ascend 2.5% in May

Existing-home sales rebounded in May, recording an increase in sales for the first time in two months, according to the National Association of Realtors®. Each of the four major U.S. regions saw a growth in sales, with the Northeast experiencing the biggest surge last month.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, jumped 2.5% from April to a seasonally adjusted annual rate of 5.34 million in May. Total sales, however, are down 1.1% from a year ago (5.40 million in May 2018).
...
Total housing inventory3 at the end of May increased to 1.92 million, up from 1.83 million existing homes available for sale in April and a 2.7% increase from 1.87 million a year ago. Unsold inventory is at a 4.3-month supply at the current sales pace, up from both the 4.2 month supply in April and from 4.2 months in May 2018.
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 May (5.34 million SAAR) were up 2.5% from last month, and were 1.1% below the May 2018 sales rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.92 million in May from 1.83 million in April.   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 was up 2.7% year-over-year in May compared to May 2018.

Months of supply increased to 4.3 months in May.

This was above the consensus forecast.  For existing home sales, a key number is inventory - and inventory is still low. I'll have more later …

by Calculated Risk on 6/20/2019 05:27:00 PM

Friday:
• At 10:00 AM, Existing Home Sales for May from the National Association of Realtors (NAR). The consensus is for 5.29 million SAAR, up from 5.19 million.

Housing economist Tom Lawler expects the NAR to report sales of 5.40 million SAAR for May.

by Calculated Risk on 6/20/2019 12:47:00 PM

The next Federal Open Market Committee (FOMC) meeting is scheduled for July 30th and 31st. Depending on the data - and other events - the committee might cut the Fed Funds rate at the July meeting.

Here are some key economic releases to watch:

• June Employment report scheduled for July 5th at 8:30 AM.

• Gross Domestic Product, 2nd quarter 2019 (advance estimate), and annual update, July 26th at 8:30 AM.

And on inflation:
• May Personal Income and Outlays, June 28th at 8:30 AM

• June Personal Income and Outlays, July 30th at 8:30 AM

• June Consumer Price Index, July 11th at 8:30 AM

And on housing:
• May New Home Sales, June 25th at 10:00 AM

• June Housing Starts, July 17th at 8:30 AM

• June New Home Sales, July 24th at 10:00 AM

Other key event:
• Trade Talks at G20 Meeting, on June 28th and 29th

by Calculated Risk on 6/20/2019 09:52:00 AM

From Black Knight: Black Knight’s First Look: Continued Improvement Pushes Mortgage Delinquencies to New Record Low in May; Prepayment Activity Doubles Over Past Four Months

• The national delinquency rate has fallen for the third consecutive month, hitting 3.36% in May, its lowest level since Black Knight began reporting the metric in January 2000

• Both early-stage and serious delinquencies fell from April, as did loans in active foreclosure, bringing total non-current inventory – all loans past due, including foreclosures – to its lowest point since early 2005

• Foreclosure starts also fell month-over-month to 39,000, the fewest of any month in more than 18 years

• Prepayment activity jumped another 24% in May, more than doubling over the past four months to reach its highest level in more than two years

According to Black Knight's First Look report for May, the percent of loans delinquent decreased 3.0% in May compared to April, and decreased 7.5% year-over-year.

The percent of loans in the foreclosure process decreased 1.6% in May and were down 17.4% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 3.36% in May, down from 3.47% in April.

The percent of loans in the foreclosure process decreased in May to 0.49% from 0.50% in April.

The number of delinquent properties, but not in foreclosure, is down 107,000 properties year-over-year, and the number of properties in the foreclosure process is down 48,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	May 2019	Apr 2019	May 2018	May 2017
Delinquent	3.36%	3.47%	3.64%	3.79%
In Foreclosure	0.49%	0.50%	0.59%	0.83%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	1,760,000	1,812,000	1,867,000	1,972,000
Number of properties in foreclosure pre-sale inventory:	255,000	259,000	303,000	421,000
Total Properties	2,015,000	2,072,000	2,171,000	2,348,000

by Calculated Risk on 6/20/2019 08:41:00 AM

From the Philly Fed: June 2019 Manufacturing Business Outlook Survey

Manufacturing conditions in the region weakened this month, according to firms responding to the June Manufacturing Business Outlook Survey. The current activity index declined to a reading just above zero this month. The survey’s indexes for new orders, shipments, and employment remained positive but also declined from their May readings. Most of the survey’s future activity indexes improved but continue to reflect muted optimism for the remainder of the year.

The diffusion index for current general activity decreased from 16.6 in May to 0.3 this month. This is the lowest reading since February, when the index fell below zero for one month.
...
On balance, the firms continued to report increases in employment. Nearly 25 percent of the responding firms reported increases in employment, while 9 percent reported decreases this month. The employment diffusion index, however, decreased 3 points to 15.4. The average workweek index fell 4 points this month, to 7.3.
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Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through June), and five Fed surveys are averaged (blue, through May) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through May (right axis).

These early reports suggest the ISM manufacturing index will be weak in June.

by Calculated Risk on 6/20/2019 08:32:00 AM

The DOL reported:

In the week ending June 15, the advance figure for seasonally adjusted initial claims was 216,000, a decrease of 6,000 from the previous week's unrevised level of 222,000. The 4-week moving average was 218,750, an increase of 1,000 from the previous week's unrevised average of 217,750.
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The previous week was unrevised.

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 increased to 218,750.

This was close to the consensus forecast.

by Calculated Risk on 6/19/2019 08:43:00 PM

Thursday:
• At 8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 217 thousand initial claims, down from 222 thousand last week.

• At 8:30 AM: the Philly Fed manufacturing survey for June. The consensus is for a reading of 14.0, down from 16.6.

by Calculated Risk on 6/19/2019 02:08:00 PM

Statement here.

Fed Chair Powell press conference video here starting at 2:30 PM ET.

On the projections, growth was revised down, the unemployment rate revised up slightly, and inflation was softer.

Q1 real GDP growth was at 3.1% annualized, and most analysts are projecting around 2% in Q2.  So the GDP projections were revised up slightly.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in Real GDP1	2019	2020	2021
Jun 2019	2.0 to 2.2	1.8 to 2.0	1.8 to 2.0
Mar 2019	1.9 to 2.2	1.8 to 2.0	1.7 to 2.0
Dec 2018	2.3 to 2.5	1.8 to 2.0	1.5 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.6% in May. The unemployment rate projection for 2019 was revised down slightly.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment Rate2	2019	2020	2021
Jun 2019	3.6 to 3.7	3.6 to 3.9	3.7 to 4.1
Mar 2019	3.6 to 3.8	3.5 to 3.9	3.6 to 4.0
Dec 2018	3.5 to 3.7	3.5 to 3.8	3.6 to 3.9

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2019, PCE inflation was up 1.5% from April 2018. So PCE inflation projections were revised down for 2019 and 2020.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE Inflation1	2019	2020	2021
Jun 2019	1.5 to 1.6	1.9 to 2.0	2.0 to 2.1
Mar 2019	1.8 to 1.9	2.0 to 2.1	2.0 to 2.1
Dec 2018	1.8 to 2.1	2.0 to 2.1	2.0 to 2.1

PCE core inflation was up 1.6% in April year-over-year. So Core PCE inflation was revised down for 2019 and slightly for 2020.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core Inflation1	2019	2020	2021
Jun 2019	1.7 to 1.8	1.9 to 2.0	2.0 to 2.1
Mar 2019	1.9 to 2.0	2.0 to 2.1	2.0 to 2.1
Dec 2018	2.0 to 2.1	2.0 to 2.1	2.0 to 2.1

by Calculated Risk on 6/19/2019 02:02:00 PM

FOMC Statement:

Information received since the Federal Open Market Committee met in May indicates that the labor market remains strong and that economic activity is rising at a moderate rate. Job gains have been solid, on average, in recent months, and the unemployment rate has remained low. Although growth of household spending appears to have picked up from earlier in the year, indicators of business fixed investment have been soft. On a 12-month basis, overall inflation and inflation for items other than food and energy are running below 2 percent. Market-based measures of inflation compensation have declined; survey-based measures of longer-term inflation expectations are little changed.

Consistent with its statutory mandate, the Committee seeks to foster maximum employment and price stability. In support of these goals, the Committee decided to maintain the target range for the federal funds rate at 2-1/4 to 2-1/2 percent. The Committee continues to view sustained expansion of economic activity, strong labor market conditions, and inflation near the Committee's symmetric 2 percent objective as the most likely outcomes, but uncertainties about this outlook have increased. In light of these uncertainties and muted inflation pressures, the Committee will closely monitor the implications of incoming information for the economic outlook and will act as appropriate to sustain the expansion, with a strong labor market and inflation near its symmetric 2 percent objective.

In determining the timing and size of future adjustments to the target range for the federal funds rate, the Committee will assess realized and expected economic conditions relative to its maximum employment objective and its symmetric 2 percent inflation objective. This assessment will take into account a wide range of information, including measures of labor market conditions, indicators of inflation pressures and inflation expectations, and readings on financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; Richard H. Clarida; Charles L. Evans; Esther L. George; Randal K. Quarles; and Eric S. Rosengren. Voting against the action was James Bullard, who preferred at this meeting to lower the target range for the federal funds rate by 25 basis points.
emphasis added

by Calculated Risk on 6/19/2019 12:53:00 PM

From housing economist Tom Lawler: Early Read on Existing Home Sales in May

I project that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.40 million in May, up 4.0% from April’s preliminary estimate and unchanged from last May’s seasonally adjusted pace.

CR Note: Existing home sales for May are scheduled to be released on Friday, June 21st. The consensus is the NAR will report sales of 5.29 million SAAR.