by Calculated Risk on 2/17/2016 11:44:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Slight Contraction in Architecture Billings Index

Following a generally positive performance in 2015, the Architecture Billings Index has begun this year modestly dipping back into negative terrain. As a leading economic indicator of construction activity, the ABI reflects the approximate nine to twelve month lead time between architecture billings and construction spending. The American Institute of Architects (AIA) reported the January ABI score was 49.6, down slightly from the mark of 51.3 in the previous month. This score reflects a minor decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 55.3, down from a reading of 60.5 the previous month.

“The fundamentals are mostly sound in the nonresidential design and construction market,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “January was a rocky month throughout the economy, with falling oil prices, international economic concerns, and with steep declines in stock market valuations in the U.S. and elsewhere. Some of the fallout of this uncertainty may have affected progress on design projects.”
...
• Regional averages: West (50.8), Northeast (50.4), South (50.3), Midwest (48.9)

• Sector index breakdown: multi-family residential (51.9), commercial / industrial (50.5), institutional (49.9), mixed practice (49.0)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 49.6 in January, down from 51.3 in December. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

The multi-family residential market was negative for most of last year - suggesting a slowdown or less growth for apartments - but has been positive for the last four months.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index was positive in 8 of the last 12 months, suggesting a further increase in CRE investment in 2016.

by Calculated Risk on 2/17/2016 09:25:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production increased 0.9 percent in January after decreasing 0.7 percent in December. A storm late in the month likely held down production in January by a small amount. The index for utilities jumped 5.4 percent; demand for heating moved up markedly after having been suppressed by unseasonably warm weather in December. Manufacturing output increased 0.5 percent in January and was 1.2 percent above its year-earlier level. Mining production was unchanged following four months with declines that averaged about 1 1/2 percent per month. At 106.8 percent of its 2012 average, total industrial production in January was 0.7 percent below its year-earlier level. Capacity utilization for the industrial sector increased 0.7 percentage point in January to 77.1 percent, a rate that is 2.9 percentage points below its long-run (1972–2015) average.
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Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 10.2 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 77.1% is 2.9% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production increased 0.9% in January to 106.8. This is 22.5% above the recession low, and 1.5% above the pre-recession peak.

This was above expectations of a 0.4% decrease, as production bounced back from the decline in December (mostly due to weather).

by Calculated Risk on 2/17/2016 08:37:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,099,000. This is 3.8 percent below the revised December estimate of 1,143,000, but is 1.8 percent above the January 2015 rate of 1,080,000.

Single-family housing starts in January were at a rate of 731,000; this is 3.9 percent below the revised December figure of 761,000. The January rate for units in buildings with five units or more was 354,000.

Building Permits:
Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,202,000. This is 0.2 percent below the revised December rate of 1,204,000, but is 13.5 percent above the January 2015 estimate of 1,059,000.

Single-family authorizations in January were at a rate of 720,000; this is 1.6 percent below the revised December figure of 732,000. Authorizations of units in buildings with five units or more were at a rate of 442,000 in January.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in January.  Multi-family starts are down 2% year-over-year.

Single-family starts (blue) decreased in January and are up 3.5% year-over-year.



The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

Total housing starts in January were below expectations.  I'll have more later ...

by Calculated Risk on 2/17/2016 07:00:00 AM

From the MBA: Refinance Applications Drive Increase in Latest MBA Weekly Survey

Mortgage applications increased 8.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 12, 2016.
...
The Refinance Index, Conventional Refinance Index and Government Refinance Index increased 16 percent from the previous week, reaching their highest levels since January 2015. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 30 percent higher than the same week one year ago.
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to its lowest level since April 2015, 3.83 percent, from 3.91 percent, with points decreasing to 0.36 from 0.41 (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.

Refinance activity was higher in 2015 than in 2014, but it was still the third lowest year since 2000.

Refinance activity has picked up recently as rates have declined.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is 30% higher than a year ago.

by Calculated Risk on 2/16/2016 06:49:00 PM

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

• At 8:30 AM, Housing Starts for January. The consensus is for 1.175 million starts, up from December.

• At 8:30 AM, the Producer Price Index for January from the BLS. The consensus is for a 0.2% decrease in prices, and a 0.1% increase in core PPI.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for January. The consensus is for a 0.4% decrease in Industrial Production, and for Capacity Utilization to increase to 76.7%.

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

• At 2:00 PM, the Fed will release the FOMC Minutes for the Meeting of January 26-27, 2016

by Calculated Risk on 2/16/2016 02:01:00 PM

From the LA Times: Southern California home sales increase in January compared with a year earlier

Southern California home sales in January posted a 7.3% gain compared with the same month a year ago, marking the strongest January for sales since 2013, according to real estate data released Tuesday.

Last month, 14,619 new and existing homes and condominiums were sold in Southern California, according to data firm CoreLogic. ...

"Some people prefer not to buy and sell during the holidays or in the middle of winter, so January and February tend to be relatively weak months for closings and, as such, they're not especially predictive of what's to come for the rest of the year," he said in a statement.

The NAR will report January existing home sales on Tuesday, Feb 23rd.

by Calculated Risk on 2/16/2016 10:25:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 58 in February, down from 61 in January (revised up). Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence Drops Three Points in February

Builder confidence in the market for newly-built single-family homes fell three points to 58 in February from an upwardly revised January reading of 61 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

“Though builders report the dip in confidence this month is partly attributable to the high cost and lack of availability of lots and labor, they are still positive about the housing market,” said NAHB Chairman Ed Brady, a home builder and developer from Bloomington, Ill. “Of note, they expressed optimism that sales will pick up in the coming months.”

“Builders are reflecting consumers’ concerns about recent negative economic trends,” said NAHB Chief Economist David Crowe. “However, the fundamentals are in place for continued growth of the housing market. Historically low mortgage rates, steady job gains, improved household formations and significant pent up demand all point to a gradual upward trend for housing in the year ahead.”
...
The HMI component measuring sales expectations in the next six months rose one point to 65 in February. The index measuring current sales condition fell three points to 65 and the component charting buyer traffic dropped five points to 39.

Looking at the three-month moving averages for regional HMI scores, all four regions registered slight declines. The Midwest fell one point to 57, the West registered a three-point drop to 72 and the Northeast and South each posted a two-point decline to 47 and 59, respectively.
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Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was below the consensus forecast of 61, but still a strong reading.

by Calculated Risk on 2/16/2016 08:36:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity declined for a seventh consecutive month for New York manufacturing firms, according to the February 2016 survey. After dropping to its lowest level since the Great Recession in January, the general business conditions index edged up three points to -16.6. The new orders index climbed twelve points to -11.6, indicating that orders fell, though at a slower pace than last month.
...
The index for number of employees rose twelve points to -1.0, indicating that employment levels were flat, and the average workweek index held steady at -6.0, signaling that the average workweek shortened.

This was below the consensus forecast of -10.0, and indicates manufacturing continued to contract in the NY region.

by Calculated Risk on 2/15/2016 07:33:00 PM

Tuesday:
• At 8:30 AM ET, NY Fed Empire State Manufacturing Survey for February. The consensus is for a reading of -10.0, up from -19.4.

• At 10:00 AM, the February NAHB homebuilder survey. The consensus is for a reading of 61, up from 60 in December.  Any number above 50 indicates that more builders view sales conditions as good than poor.

Some people are wondering if consumers are saving the extra money from the decline in oil and gasoline prices - and are waiting to see if the price decline will hold.

Click on graph for larger image.

This graph shows the three month trailing average of the personal saving rate from the BEA (Personal saving as a percentage of disposable personal income). The rate has been increasing a little recently, but not that much.

Note: this data is heavily revised, so I'm not confident in the trend.

It still isn't clear from the data what is happening to the money saved on gasoline.

by Calculated Risk on 2/15/2016 01:40:00 PM

Way back in 2005, I posted a graph of the Real Estate Agent Boom. Here is another update to the graph.

The graph shows the number of real estate licensees in California.

The number of agents peaked at the end of 2007 (housing activity peaked in 2005, and prices in 2006).

The number of salesperson's licenses is off 32.8% from the peak, and may be starting to increase again (but up less than 1% year-over-year). The number of salesperson's licenses has fallen to April 2004 levels.

Brokers' licenses are off 11.3% from the peak and have only fallen to April 2006 levels, but are still slowly declining (down 1.5% year-over-year).

Click on graph for larger image.

So far there been no significant pickup in the number of real estate agents!