by Calculated Risk on 1/22/2014 12:55:00 PM

First, an interesting article from Brad Plumer at the WaPo: The U.S. government keeps predicting we’ll drive more than we do. That’s a problem.

The Department of Transportation (DOT) reported:

Travel on all roads and streets changed by -0.1% (-0.2 billion vehicle miles) for November 2013 as compared with November 2012. Travel for the month is estimated to be 239.5 billion vehicle miles.

The following graph shows the rolling 12 month total vehicle miles driven.

The rolling 12 month total is still mostly moving sideways but has started to increase a little recently.


Click on graph for larger image.

In the early '80s, miles driven (rolling 12 months) stayed below the previous peak for 39 months.

Currently miles driven has been below the previous peak for 72 months - 6 years - and still counting.  Currently miles driven (rolling 12 months) are about 2.3% below the previous peak.

The second graph shows the year-over-year change from the same month in the previous year.

 In November 2013, gasoline averaged of $3.32 per gallon according to the EIA.  that was down sharply from 2012 when prices in November averaged $3.52 per gallon.


As we've discussed, gasoline prices are just part of the story.  The lack of growth in miles driven over the last 6 years is probably also due to the lingering effects of the great recession (high unemployment rate and lack of wage growth), the aging of the overall population (over 55 drivers drive fewer miles) and changing driving habits of young drivers.

With all these factors, it might take a few more years before we see a new peak in miles driven - but it appears miles driven might be gradually increasing again.

by Calculated Risk on 1/22/2014 09:54:00 AM

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

From AIA: Another Decline for Architecture Billings Index

Following consistently increasing demand for design services throughout most of 2013, the Architecture Billings Index (ABI) has posted its first consecutive months of contraction since May and June of 2012. 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 December ABI score was 48.5, down from a mark of 49.8 in November. This score reflects a decrease in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.2, up from the reading of 57.8 the previous month.

“What we thought last month was an isolated dip now bears closer examination to see what is causing the slowdown in demand for architectural services,” said AIA Chief Economist Kermit Baker, Hon. AIA, PhD. “It is possible that some of this can be attributed to the anxiety in the marketplace caused by the shutdown of the federal government, but it will be important to see how business conditions fare through the first quarter of the new year when we no longer have end of the year issues to deal with.”
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 48.5 in December, down from 49.8. Anything below 50 indicates contraction in demand for architects' services.  Still this index has indicated expansion in 14 of the last 17 months.

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

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  Even when positive, this index was not as strong as during the '90s - or during the bubble years of 2004 through 2006 - because the vacancy rates are still high for many CRE sectors.  However, the readings last year do suggest some increase in CRE investment in 2014.

by Calculated Risk on 1/22/2014 07:02:00 AM

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

Mortgage applications increased 4.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 17, 2014. ...

The Refinance Index increased 10 percent from the previous week. The seasonally adjusted Purchase Index decreased 4 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.57 percent, the lowest level since November 2013, from 4.66 percent, with points increasing to 0.36 from 0.33 (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.

The refinance index is up a little over the last two week, but down 67% from the levels in early May.

With the mortgage rate increases, refinance activity will be significantly lower in 2014 than in 2013.


The second graph shows the MBA mortgage purchase index.  

The 4-week average of the purchase index is now down about 9% from a year ago.

The purchase index is probably understating purchase activity because small lenders tend to focus on purchases, and those small lenders are underrepresented in the purchase index.

by Calculated Risk on 1/21/2014 07:26:00 PM

I try to avoid being a "media critic" because it would be a full-time job (my former co-blogger Tanta pointed out numerous errors by reporters). However this Yahoo article bothered me enough today to comment: To get ahead, more Americans must do this one thing.

The article started "Economists have been puzzled about why the latest recession produced such a feeble recovery ...". Really? Most of the economists I respect forecast a sluggish recovery for several key reasons: 1) recoveries from financial crisis tend to be slow, 2) household balance sheets had to be repaired, 3) housing (usually the best leading sector) was going to languish due to excess supply of vacant homes and a high number of distressed properties, 4) state and local governments were cutting back significantly (the "50 little Hoovers"), 5) the stimulus package was too small and ended too soon - and the Federal government pivoted to austerity (deficit reduction) too soon.

I could list a few more reasons, but the sluggish recovery was not a puzzle - and was predicted by me (in 2009) and many others. 

The article focuses on mobility (an interesting topic). Of course I was writing about how the housing bust would probably impact labor mobility in 2008. So this isn't exactly new ground, and I don't think mobility was a leading reason for the sluggish recovery.

Wednesday:
• At 7:00 AM ET, 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).

by Calculated Risk on 1/21/2014 02:08:00 PM

From DataQuick: California Foreclosure Starts Dip to Eight-Year Low

The number of California homeowners pulled into the formal foreclosure process dropped to an eight-year low last quarter, the result of an improving economy, foreclosure prevention efforts and higher home prices, a real estate information service reported.

A total of 18,120 Notices of Default (NoDs) were recorded by lenders and their servicers on California owners of houses and condos during the October-through-December period. That was down 10.8 percent from 20,314 for the prior quarter, and down 52.6 percent from 38,212 in fourth-quarter 2012. Last quarter's tally was the lowest since 15,337 NoDs were recorded during fourth-quarter 2005. NoDs peaked in first-quarter 2009 at 135,431. DataQuick's NoD statistics go back to 1992.

"Some of this decline in foreclosure starts stems from the use of various foreclosure prevention efforts - short sales, loan modifications and the ability of some underwater homeowners to refinance. But most of the drop is because of the improving economy and the increase in home values. Fewer people are behind on their mortgage payments. And of those who do get into trouble, many, if not most, can sell and pay off what they owe. Also, those who are underwater and close to slipping into foreclosure are far less likely to give up their homes now that appreciation has returned to the housing market. There's a strong incentive to hang on," said John Walsh, DataQuick president.
...
Most of the loans going into default are still from the 2005-2007 period. The median origination quarter for defaulted loans is still third-quarter 2006. That has been the case for more than four years, indicating that weak underwriting standards peaked then.
emphasis added

Click on graph for larger image.

This graph shows the number of Notices of Default (NoD) filed in California each year.   2013 is in red.

This was the lowest year for foreclosure starts since 2005, and also below the levels in 1997 through 2000 when prices were rising following the much smaller late '80s housing bubble / early '90s bust in California.

Some of the decline in foreclosure starts is related to the "Homeowner Bill of Rights" that slowed foreclosures, some to higher house prices and a better economy - but overall foreclosure starts are close to a normal level (foreclosure starts were over 50,000 in 2004 and 2005 when prices were rising quickly).

Note: Foreclosures are still higher than normal in states with a judicial foreclosure process.