by Calculated Risk on 7/24/2019 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 1.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 19, 2019.

... The Refinance Index decreased 2 percent from the previous week and was 81 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 6 percent higher than the same week one year ago.
...
“Mortgage applications were down last week, even as rates moved lower across the board, with the 30-year fixed rate at 4.08 percent. Refinance activity was lower, but we did see government refinance applications increase, driven solely by a 12 percent rise in FHA applications,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Mortgage rates right now are comparable to the average rate of 4.10 percent for June, but refinances last week were 7 percent lower than last month. This is an indication that as we see rates lower for longer, borrowers need more of a drop in rates to consider refinancing.”

Added Kan, “Purchase applications decreased for the second straight week and have been somewhat volatile lately, but were still 6 percent higher than a year ago.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($484,350 or less) decreased to 4.08 percent from 4.12 percent, with points decreasing to 0.33 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

Mortgage rates have declined from close to 5% late last year to around 4% now.

Just about anyone who bought or refinanced over the last year or so can refinance now.   But it would take another significant decline in rates for a further large increase in refinance activity.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 6% year-over-year.

by Calculated Risk on 7/23/2019 07:38:00 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 June from the Census Bureau. The consensus is for 655 thousand SAAR, up from 626 thousand in May.

by Calculated Risk on 7/23/2019 04:55:00 PM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Fell in July

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), eased 0.2 percent in July on a three-month moving average (3MMA) basis following three months of gains in March-May and weak months in the winter. On a year-over-year (Y/Y) basis, the barometer fell 0.2 percent (3MMA).
...
A pattern of fluctuating barometer readings – months up followed by months down – indicates late-cycle activity,” said Kevin Swift, chief economist at ACC. “The CAB reading continues to signal moderate gains in U.S. commercial and industrial activity through late 2019, but rising volatility suggests change may be on the way.”
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen 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).

The year-over-year increase in the CAB suggests that the YoY increase in industrial production will probably slow further.

by Calculated Risk on 7/23/2019 01:47:00 PM

Earlier from the Richmond Fed: Fifth District Manufacturing Activity Weakened in July

Fifth District manufacturing activity weakened in July, according to the most recent survey from the Richmond Fed. The composite index fell from 2 in June to −12 in July, its lowest reading since January 2013, as all three components — shipments, new orders, and employment — registered declines. Backlogs of orders also fell, reaching a value of −26, its lowest reading since April 2009. Firms reported worsening local business conditions, as this index dropped from 7 to −18, its largest one-month drop on record. However, respondents were optimistic that conditions would improve in the coming months.

Survey results indicated that employment and the average workweek declined in July. However, wage growth continued among survey respondents. Firms continued to struggle to find workers with the necessary skills and expect that struggle to continue in the next six months.
emphasis added

This was a very weak report.

by Calculated Risk on 7/23/2019 10:29:00 AM

Earlier: NAR: Existing-Home Sales Decreased to 5.27 million in June

A few key points:

1) The key for housing - and the overall economy - is new home sales, single family housing starts and overall residential investment.

Overall, this is still a somewhat reasonable level for existing home sales.  No worries.

2) Inventory is still low, and was unchanged year-over-year (YoY) in June. Inventory had been up YoY every month since July 2018.

3) 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 June.   The consensus was for sales of 5.34 million SAAR.  Lawler estimated the NAR would report 5.25 million SAAR in June, and the NAR actually reported 5.27 million SAAR.

Click on graph for larger image.

4) Year-to-date sales are down about 4.2% compared to the same period in 2018.   On an annual basis, that would put sales around 5.15 million in 2019.  Sales slumped at the end of 2018 and in January 2019 due to higher mortgage rates, the stock market selloff, and fears of an economic slowdown.

The comparisons will be easier towards the end of the year.

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

Sales NSA in June (527,000, red column) were well below sales in June 2018 (570,000, NSA), and were the lowest sales for June since 2014.

by Calculated Risk on 7/23/2019 10:09:00 AM

From the NAR: Existing-Home Sales Falter 1.7% in June

Existing-home sales weakened in June, as total sales saw a small decline after a previous month of gains, according to the National Association of Realtors®. While two of the four major U.S. regions recorded minor sales jumps, the other two – the South and the West – experienced greater declines last month.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops, dropped 1.7% from May to a seasonally adjusted annual rate of 5.27 million in June. Sales as a whole are down 2.2% from a year ago (5.39 million in June 2018).
...
Total housing inventory at the end of June increased to 1.93 million, up from 1.91 million existing-homes available for sale in May, but unchanged from the level of one year ago. Unsold inventory is at a 4.4-month supply at the current sales pace, up from the 4.3 month supply recorded in both May and in June 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 June (5.27 million SAAR) were down 1.7% from last month, and were 2.2% below the June 2018 sales rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.93 million in June from 1.91 million in May.   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 unchanged year-over-year in June compared to June 2018.

Months of supply increased to 4.4 months in June.

This was below 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 7/22/2019 06:50:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Fall Again as Lenders Play Catch Up

Mortgage rates lower again today. The improvement was fairly decent given the amount of movement seen in the bond market. The reason for that has to do with the phenomenon we discussed on Friday whereby mortgage lenders are generally a bit cautious when it comes to adjusting rate sheets to keep pace with bond market movement. With that in mind, bonds had improved during the day on Friday, but most lenders didn't adjust rates in the afternoon. Simply put, we are seeing Friday afternoon's bond market improvement today. [Most Prevalent Rates 30YR FIXED - 3.875%]
emphasis added

Tuesday:
• At 9:00 AM ET, FHFA House Price Index for May 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for 5.34 million SAAR, unchanged from 5.34 million last month. Housing economist Tom Lawler expects the NAR to report 5.25 million SAAR.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for July.

by Calculated Risk on 7/22/2019 02:49:00 PM

A year ago I posted a list of the top twenty five GDP quarters since 2000.   Here is an update.

The advance estimate of Q2 GDP data will be released this Friday, and the consensus estimate is for real GDP to increase 1.9% in Q2 2019 (Annualized).

Last year, in Q2 2018, GDP increased 4.2%, making it the tenth best quarter for real annualized GDP since Q1 2000.

As I've noted before, based on demographics, 2% is the new 4% (that is just simple arithmetic).

Top 25 GDP Quarters since 2000 Real GDP, Annualized Rate
	GDP	Year	Quarter	President
1	7.5%	2000	Q2	Clinton
2	7.0%	2003	Q3	GW Bush
3	5.4%	2006	Q1	GW Bush
4	5.1%	2014	Q2	Obama
5	4.9%	2014	Q3	Obama
6	4.7%	2011	Q4	Obama
7	4.7%	2003	Q4	GW Bush
8	4.5%	2005	Q1	GW Bush
9	4.5%	2009	Q4	Obama
10	4.2%	2018	Q2	Trump
11	4.1%	2004	Q4	GW Bush
12	3.8%	2004	Q3	GW Bush
13	3.7%	2010	Q2	Obama
14	3.6%	2005	Q3	GW Bush
15	3.6%	2013	Q1	Obama
16	3.5%	2002	Q1	GW Bush
17	3.5%	2003	Q2	GW Bush
18	3.5%	2006	Q4	GW Bush
19	3.4%	2018	Q3	Trump
20	3.3%	2015	Q2	Obama
21	3.3%	2015	Q1	Obama
22	3.2%	2013	Q4	Obama
23	3.2%	2013	Q3	Obama
24	3.2%	2012	Q1	Obama
25	3.1%	2019	Q1	Trump

by Calculated Risk on 7/22/2019 10:34:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 13 July

The U.S. hotel industry reported negative year-over-year results in the three key performance metrics during the week of 7-13 July 2019, according to data from STR.

n comparison with the week of 8-14 July 2018, the industry recorded the following:

• Occupancy: -2.4% to 74.2%
• Average daily rate (ADR): -0.6% to US$132.24
• Revenue per available room (RevPAR): -2.9% to US$98.08
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Occupancy has been solid in 2019, close to-date compared to the previous 4 years.

Seasonally, the occupancy rate will now stay at a high level during the Summer travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 7/22/2019 08:35:00 AM

From the Chicago Fed: Index Points to Economic Growth near Historical Trend in June

The Chicago Fed National Activity Index (CFNAI) ticked up to –0.02 in June from –0.03 in May. One of the four broad categories of indicators that make up the index increased from May, and two of the four categories made negative contributions to the index in June. The index’s three-month moving average, CFNAI-MA3, ticked up to –0.26 in June from –0.27 in May.
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 below the historical trend in June (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.