by Calculated Risk on 1/18/2014 08:15:00 AM

This will be light week for economic releases.  The key report this week is existing home sales on Thursday.

For manufacturing, the Kansas City Fed January survey will be released this week. 

For commercial real estate (CRE), the Architecture Billings Index will be released.

----- Monday, January 20th -----
All US markets will be closed in observance of the Martin Luther King, Jr. Day holiday.

----- Tuesday, January 21st -----
No economic releases scheduled.

----- Wednesday, January 22nd -----
7:00 AM: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

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

----- Thursday, January 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for claims to increase to 330 thousand from 326 thousand.

9:00 AM: The Markit US PMI Manufacturing Index Flash for January. The consensus is for an increase to 55.0 from 54.4 in December.

9:00 AM: FHFA House Price Index for November 2013. This was original a GSE only repeat sales, however there is also an expanded index. The consensus is for a 0.4% increase.

10:00 AM: Existing Home Sales for December from the National Association of Realtors (NAR).

The consensus is for sales of 4.90 million on seasonally adjusted annual rate (SAAR) basis. Sales in November were at a 4.90 million SAAR. Economist Tom Lawler estimates the NAR will report sales of 4.96 million SAAR.

As always, a key will be inventory of homes for sale.

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

----- Friday, January 24th -----
No economic releases scheduled.

by Calculated Risk on 1/17/2014 07:25:00 PM

From the FDIC: Republic Bank of Chicago, Oak Brook, Illinois, Assumes All of the Deposits of DuPage National Bank, West Chicago, Illinois

As of September 30, 2013, DuPage National Bank had approximately $61.7 million in total assets and $59.6 million in total deposits. ... The FDIC estimates that the cost to the Deposit Insurance Fund (DIF) will be $1.6 million. Compared to other alternatives, Republic Bank of Chicago's acquisition was the least costly resolution for the FDIC's DIF. DuPage National Bank is the 1st FDIC-insured institution to fail in the nation this year.

It will probably be a slow year for the FDIC, but there still quite a few "problem" banks that could fail.

by Calculated Risk on 1/17/2014 04:20:00 PM

From housing economist Tom Lawler:

Based on realtor association/MLS reports from across the country, I estimate that US existing home sales as measured by the National Association of Realtors ran at a seasonally adjusted annual rate of 4.96 million in December, up 1.2% from both November’s seasonally adjusted pace and last December’s seasonally adjusted pace. I estimate that unadjusted sales (as measured by the NAR) showed a slightly higher YOY growth than SA sales, reflecting this December’s higher business day count than last December.

YOY sales results varied massively across the country. California home sales showed a sizable YOY drop last month, reflecting a large decline in “distressed” sales as well as a steep decrease in investor buying of both distressed and non-distressed sales, combined with relatively flat sales to owner occupants. Phoenix and Las Vegas also experienced big YOY declines, for similar reasons. Some realtors attributed the weak sales to low inventories, but a better way to put it was that sales were down sharply from a year ago in these areas because of a lack of inventory priced either attractively for investment/rental purposes or at prices readily affordable to many potential buyers.

A few areas where the government shutdown appeared to impact closed sales in November experienced a rebound in closed sales in December. For example, in November closed MLS-based sales in the DC metro market were down much more sharply than “normal” on the month, and were off 13.7% YOY. Closed sales bounced back up last month, and were up 9.7% YOY. However, new pending sales in December were down sharply in December, and were off 7.0% YOY, suggesting that “something else” (including high listing prices) was negatively impacting sales in the area.

There were several other markets where closed sales rebounded in December from November but where pending sales in December looked weak.

On the inventory front, the inventory of existing homes for sale typically declines significantly from November to December in most (but not all) parts of the country, and that was clearly the case last month. In fact, inventories as reported by realtor associations/MLS declined by a bit more than the “seasonal” norm in a significant number of markets. Based on these reports as well as reports by various entities that track listings, I’d “guesstimate” that the monthly decline in the inventory of existing homes for sale from November to December was about 8.3%, compared to last December’s monthly drop (as estimated by the NAR) of 8.0%.

Trying to gauge the level of the NAR’s existing home inventory estimate for December, however, is a bit trickier. The monthly decline in the NAR’s existing home inventory estimate in November was significantly smaller both than realtor association/MLS reports and listing trackers reports would have suggested, and I think it is likely that the NAR’s inventory estimate will be revised downward. It is worth noting that the NAR’s preliminary inventory estimate has been revised downward in each of the last six reports (by an average of 1.8%), and that last November’s preliminary inventory estimate was revised downward in the subsequent report by 2.0%. If November’s inventory estimate is revised downward by 1.9%, AND December’s estimate is 8.3% lower than November’s estimate, then the December estimate will be up 2.7% from a year earlier. (You have to be a NUT to try to estimate the NAR data!)

Finally, based on realtor association/MLS reports, my “gueestimate” is that the NAR’s estimate of the median existing SF home sales price is December will be up by about 8.0% from a year earlier. (The November MSP was up 9.4% YOY).

CR Note: The NAR will release the December Existing home sales report next Thursday, and the early consensus is for sales of 5.0 million SAAR (Close to Lawler's estimate).

by Calculated Risk on 1/17/2014 01:54:00 PM

A few key points:

• Housing starts increased 18.3% in 2013 (initial estimate). This was another solid year-over-year increase.

• Even after increasing 28% in 2012 and 18% in 2013, the 923 thousand housing starts in 2013 were the sixth lowest on an annual basis since the Census Bureau started tracking starts in 1959 (the three lowest years were 2008 through 2012).   Also, this was the fifth lowest year for single family starts since 1959 (only 2009 through 2012 were lower).

• Starts averaged 1.5 million per year from 1959 through 2000.  Demographics and household formation suggests starts will return to close to that level over the next few years. That means starts will probably increase another 50%+ from the 2013 level.

• Residential investment and housing starts are usually the best leading indicator for economy.  Nothing is foolproof as a leading indicator, but this suggests the economy will continue to grow over the next couple of years.

The following table shows annual starts (total and single family) since 2005:

Housing Starts (000s)
	Total	Change	Single Family	Change
2005	2,068.3	---	1,715.8	---
2006	1,800.9	-12.9%	1,465.4	-14.6%
2007	1,355.0	-24.8%	1,046.0	-28.6%
2008	905.5	-33.2%	622.0	-40.5%
2009	554.0	-38.8%	445.1	-28.4%
2010	586.9	5.9%	471.2	5.9%
2011	608.8	3.7%	430.6	-8.6%
2012	780.6	28.2%	535.5	24.4%
2013	923.4	18.3%	617.8	15.4%

I expect another solid increase for housing starts in 2014.

Here is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

Click on graph for larger image.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) has been increasing steadily, and completions (red line) is lagging behind - but completions will continue to follow starts up (completions lag starts by about 12 months).

This means there will be an increase in multi-family deliveries in 2014, but probably still below the 1997 through 2007 level of multi-family completions.  Multi-family starts will probably move mostly sideways in 2014.

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Starts are moving up, and completions are following. 

Note the exceptionally low level of single family starts and completions.  The "wide bottom" was what I was forecasting several years ago, and now I expect several years of increasing single family starts and completions.

by Calculated Risk on 1/17/2014 11:16:00 AM

Update: I misread the "quits" in the report. Quits actually increased in November (ht Chris).

From the BLS: Job Openings and Labor Turnover Summary

There were 4.0 million job openings on the last business day of November, little changed from October, the U.S. Bureau of Labor Statistics reported today. The hires rate (3.3 percent) and separations rate (3.1 percent) were unchanged in November. ...
...
Quits are generally voluntary separations initiated by the employee. Therefore, the quits rate can serve as a measure of workers’ willingness or ability to leave jobs. Layoffs and discharges are involuntary separations initiated by the employer. ... The number of quits (not seasonally adjusted) increased over the 12 months ending in November for total nonfarm and total private and was little changed for government.

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for November, the most recent employment report was for December.

Click on graph for larger image.

Notice that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in November to 4.001 million from 3.931 million in October.   

The number of job openings (yellow) is up 5.6% year-over-year compared to November 2012 and this is the first time job openings have been above 4 million since 2008..

Quits increased (updated) in November and are up about 13% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Not much changes month-to-month in this report - and the data is noisy month-to-month, but the general trend suggests a gradually improving labor market.  It is a good sign that job openings are at the highest level since 2008.