by Calculated Risk on 2/28/2014 10:59:00 AM

From the NAR: Pending Home Sales Hold Steady in January

The Pending Home Sales Index, a forward-looking indicator based on contract signings, edged up 0.1 percent to 95.0 in January from an upwardly revised 94.9 in December, but is 9.0 percent below January 2013 when it was 104.4.
...
The December index reading was the lowest since November 2011, when it stood at 94.6.

The PHSI in the Northeast rose 2.3 percent to 79.0 in January, but is 5.3 percent below a year ago. In the Midwest the index declined 2.5 percent to 92.9 in January, and is 9.3 percent lower than January 2013. Pending home sales in the South increased 3.5 percent to an index of 111.2 in January, and is 5.5 percent below a year ago. The index in the West fell 4.8 percent in January to 84.2, and is 17.5 percent below January 2013.

Existing-home sales are expected to be weak in the first quarter

A few comments:
• Mr. Yun blamed some of the decline on the weather (the weather was unusually bad again in January), but the index remained weak in the South too (down 5.5% year-over-year and probably not weather), and in the West (partially related to low inventories).

• My view is there were several reasons for the decline in this index: weather in some areas, fewer distressed sales, less investor buying, fewer "pending" short sales, and low inventories.  I think fewer distressed sales, fewer "pending" short sales, and less investor buying are all signs of a healthier market - even if overall sales decline.

• Mr Yun lowered has forecast for 2014 to 5.0 million existing home sales, down from his previous forecast of 5.1 million existing home sales this year. I'll take the under on his new forecast, and I think it would be a positive sign if sales were under 5 million in 2014 as long as distressed sales continue to decline and conventional sales increase.

 • Of course, for housing, what really matters for the economy and employment is new home sales (not existing), and housing starts. 

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in February and March.

by Calculated Risk on 2/28/2014 09:55:00 AM

Click on graph for larger image.

• The final Reuters / University of Michigan consumer sentiment index for February increased to 81.6 from the January reading of 81.2, and from the preliminary February reading of 81.2.

This was above the consensus forecast of 81.2. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011, and another smaller spike down last October and November due to the government shutdown.

I expect to see sentiment at post-recession highs very soon.

• From the Chicago ISM:

February 2014:

The Chicago Business Barometer remained broadly unchanged at 59.8 in February compared with 59.6 in January, as a double-digit gain in Employment offset declines in New Orders, Production and Order Backlogs. ... Some panellists cited the negative effect of the poor weather on their business, although overall this appeared to have a minor impact that was only visible in longer supplier lead times.

After expanding at a faster rate in January, Production and New Orders decelerated in February, while a more pronounced set back was seen in Order Backlogs. In contrast, the Employment Indicator bounced back sharply in February, jumping out of contraction, and nearly reversing the declines seen in the previous two months.

Commenting on the MNI Chicago Report, Philip Uglow, Chief Economist at MNI Indicators said, “The latest Chicago Report confirms that the US economic recovery continued in February, with New Orders and Production remaining at high levels.”

This was above the consensus estimate of 57.8.

by Calculated Risk on 2/28/2014 08:38:00 AM

From the BEA: Gross Domestic Product, Fourth Quarter and Annual 2013 (second estimate)

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- increased at an annual rate of 2.4 percent in the fourth quarter of 2013 (that is, from the third quarter to the fourth quarter), according to the "second" estimate released by the Bureau of Economic Analysis. ...

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 3.2 percent. ...

The second estimate of the fourth-quarter percent change in real GDP is 0.8 percentage point, or $32.7 billion, less than the advance estimate issued last month, primarily reflecting downward revisions to personal consumption expenditures (PCE), to private inventory investment, to exports, and to state and local government spending that were partly offset by an upward revision to nonresidential fixed investment.

Here is a Comparison of Second and Advance Estimates. PCE growth was revised down from 3.3% to 2.6%. Government spending was a larger drag than originally estimated (-5.6% vs -4.9%).

by Calculated Risk on 2/27/2014 08:16:00 PM

File under the new LA skyline ... another high rise is planned, from Roger Vincent at the LA Times: New high-rise on Broadway would be one of tallest in Southland

[A] 34-story apartment skyscraper more than twice as tall as most other buildings in the historic core of downtown L.A.

To be built at a cost of nearly $150 million, the apartment and retail complex called Broadway @ 4th would house 450 units and fill in a key block in gentrifying downtown L.A.

Friday:
• At 8:30 AM ET, the second estimate of Q4 GDP from the BEA. The consensus is that real GDP increased 2.5% annualized in Q4, revised down from the advance estimate of 3.2%.

• At 9:45 AM, Chicago Purchasing Managers Index for February. The consensus is for a decrease to 57.8, down from 59.6 in January.

• At 9:55 AM, Reuter's/University of Michigan's Consumer sentiment index (final for February). The consensus is for a reading of 81.2, unchanged from the preliminary reading of 81.2, and unchanged from the January reading.

• At 10:00 AM, Pending Home Sales Index for January. The consensus is for a 2.7% increase in the index.

by Calculated Risk on 2/27/2014 02:10:00 PM

From Freddie Mac: FREDDIE MAC REPORTS NET INCOME OF $48.7 BILLION FOR FULL-YEAR 2013; COMPREHENSIVE INCOME OF $51.6 BILLION

• Full-year net income and comprehensive income totaled $48.7 billion and $51.6 billion, respectively
• Fourth quarter net income and comprehensive income totaled $8.6 billion and $9.8 billion, respectively – the company’s ninth consecutive quarter of positive net income and comprehensive income
• Financial results were positively impacted by the following significant items:

• Full-year tax benefit of $23.3 billion driven by release of deferred tax asset valuation allowance
• Pre-tax benefit of legal settlements of $6.0 billion for fourth quarter and $7.7 billion for full year
• Continued improvement in home prices which contributed to reduced loan loss provisioning
• Fair value gains on derivative portfolio and non-agency mortgage-related securities

• Recent level of earnings is not sustainable over the long term
emphasis added

There were significant one time gains (tax assets, legal settlements).

Click on graph for larger image.

Here is a graph of Fannie and Freddie REO. This was the second consecutive quarterly increase in REO.

Freddie’s SF REO inventory declined over the year, and the recent increase might be seasonal. From Freddie:

In 2013, REO inventory declined primarily due to lower single-family foreclosure activity as a result of Freddie Mac’s loss mitigation efforts and a declining amount of delinquent loans.

Freddie Mac experienced an increase in REO acquisitions during 2013 compared to 2012 in the Northeast region and REO acquisitions remained high in the Southeast region. High REO acquisition volumes in these regions were primarily due to higher foreclosure volume in Maryland, Pennsylvania and Florida.