2017-04-22T08:11:00.184-04:00The key economic reports this week are Q1 GDP and March New Home sales.
2017-04-21T17:34:17.723-04:00A few comments from Steven Kopits of Princeton Energy Advisors LLC on Apr 21, 2017:
• Total US oil rigs were up 5 to 688(image) Click on graph for larger image.
• US horizontal oil rigs added 9 to 581
• The US horizontal oil rig count is now within two weeks of the entire number necessary to cover the US contribution to incremental global oil supply.
• The market has clearly become jittery, and OPEC promises to extend production cuts are no longer comforting worried investors
2017-04-21T15:05:20.528-04:00From the BLS: Regional and State Employment and Unemployment Summary
Unemployment rates were lower in March in 17 states and stable in 33 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Eighteen states had jobless rate decreases from a year earlier, and 32 states and the District had little or no change. The national unemployment rate declined by 0.2 percentage point from February to 4.5 percent and was 0.5 point lower than in March 2016.(image) Click on graph for larger image.
Colorado had the lowest unemployment rate in March, 2.6 percent, closely followed by Hawaii, 2.7 percent, and New Hampshire, North Dakota, and South Dakota, 2.8 percent each. The rates in Arkansas (3.6 percent), Colorado (2.6 percent), Maine (3.0 percent), and Oregon (3.8 percent) set new series lows. (All state series begin in 1976.) New Mexico had the highest jobless rate, 6.7 percent.
2017-04-21T12:10:01.589-04:00Earlier: NAR: "Existing-Home Sales Jumped 4.4% in March"
"I project that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.74 million in March"2) Warmer weather in February might have boosted sales for March and early April.
2017-04-21T10:09:21.997-04:00From the NAR: Existing-Home Sales Jumped 4.4% in March
Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, ascended 4.4 percent to a seasonally adjusted annual rate of 5.71 million in March from a downwardly revised 5.47 million in February. March's sales pace is 5.9 percent above a year ago and surpasses January as the strongest month of sales since February 2007 (5.79 million).(image) Click on graph for larger image.
Total housing inventory at the end of March increased 5.8 percent to 1.83 million existing homes available for sale, but is still 6.6 percent lower than a year ago (1.96 million) and has fallen year-over-year for 22 straight months. Unsold inventory is at a 3.8-month supply at the current sales pace (unchanged from February).
2017-04-21T07:59:08.663-04:00From Black Knight: Black Knight’s First Look at March Mortgage Data: Delinquency Rate Drops to 11-Year Low; Prepayments Up 20 Percent from February’s Three-Year Low
• Delinquencies declined 14 percent month-over-month, hitting their lowest level since March 2006 and the fourth lowest point since the turn of the centuryAccording to Black Knight's First Look report for March, the percent of loans delinquent decreased 14.1% in March compared to February, and declined 11.4% year-over-year.
• Total non-current inventory – all loans 30 days or more past due or in active foreclosure – fell below 2.3 million, the lowest volume in 11 years
• After hitting a three-year low in February, prepayment speeds (historically a good indicator of refinance activity) rose 20 percent in March; still 26 percent below last year’s level
• Foreclosure starts were up 4.15 percent for the month, but Q1 2017’s 189,000 starts represented an 18 percent decline from Q1 2016
|Black Knight: Percent Loans Delinquent and in Foreclosure Process|
|Number of properties:|
|Number of properties that are delinquent, but not in foreclosure:||1,831,000||2,135,000||2,062,000||2,349,000|
|Number of properties in foreclosure pre-sale inventory:||448,000||470,000||631,000||846,000|
2017-04-21T10:12:34.882-04:00I expect existing home sales to be above the consensus forecast, see: Lawler: Early Read on Existing Home Sales in March
2017-04-20T15:45:08.167-04:00From HotelNewsNow.com: STR: US hotel results for week ending 15 April
The U.S. hotel industry reported negative results in the three key performance metrics during the week of 9-15 April 2017, according to data from STR.The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.
Opposite from previous weeks, performance growth was negatively affected by the Easter calendar shift from 27 March 2016 to 16 April 2017. In comparison with the week of 10-16 April 2016, the industry reported the following:
• Occupancy: -4.6% to 64.3%
• Average daily rate (ADR): -0.2% to US$123.41
• Revenue per available room (RevPAR): -4.8% to US$79.33
2017-04-20T12:41:10.103-04:00From the National Multifamily Housing Council (NMHC): Apartment Markets Sluggish in the April NMHC Quarterly Survey
Despite moderate improvements over the first quarter of 2017, all four indexes of the National Multifamily Housing Council’s (NMHC) Quarterly Survey of Apartment Market Conditions remained below the breakeven level of 50. The Market Tightness (41), Sales Volume (30), Equity Financing (42), and Debt Financing (41) all indicated continued softening conditions in apartment markets even as demand for apartment residences remains strong.(image)
“Although all four indexes rose in April, they remain below the breakeven level of 50,” said Mark Obrinsky, NMHC’s Senior Vice President of Research and Chief Economist. “After years of lagging behind the increase in apartment demand, new supply is finally coming online in sufficient quantity to alter this supply-demand imbalance. In particular, class A supply in many urban core submarkets has led to increased concessions to fuel lease-up activity. Even so, occupancy rates remain close to historic highs.
“In the investment market, some of the weakness in property sales is seasonal, but respondents reported caution on the part of buyers as well as debt and equity capital sources – in particular in regard to construction lending. Increased uncertainty about the outlook for interest rates and cap rates also appears to be playing a role.”
The Market Tightness Index increased from 25 to 41, as one-fifth of respondents (20 percent) reported tighter conditions than three months ago, up from eight percent in January. Over one-third (38 percent) noted looser conditions. While this marks the sixth consecutive quarter of overall declining conditions, it does mark an uptick from the previous quarter.
2017-04-20T09:58:03.325-04:00Earlier from the Philly Fed: Current Indicators Continue to Reflect Growth
Results from the April Manufacturing Business Outlook Survey suggest that regional manufacturing activity continued to expand, but at a slower pace than last month. The diffusion indexes for general activity, new orders, and shipments remained positive but fell from their readings in March. The current employment index, however, improved slightly and continues to suggest expanding employment in the manufacturing sector. The survey’s future indicators continued to reflect general optimism but retreated from their high readings in the first three months of the year.Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:
The index for current manufacturing activity in the region decreased from a reading of 32.8 in March to 22.0 this month. The index has been positive for nine consecutive months and remains at a relatively high reading but has moved down the past two months ...
Firms reported an increase in manufacturing employment and work hours this month. The percentage of firms reporting an increase in employment (27 percent) exceeded the percentage reporting a decrease (8 percent). The current employment index improved 2 points, its fifth consecutive positive reading. Firms also reported an increase in work hours this month: The average workweek index was nearly unchanged at 18.9 and has registered a positive reading for six consecutive months.
2017-04-20T08:35:26.938-04:00The DOL reported:
In the week ending April 15, the advance figure for seasonally adjusted initial claims was 244,000, an increase of 10,000 from the previous week's unrevised level of 234,000. The 4-week moving average was 243,000, a decrease of 4,250 from the previous week's unrevised average of 247,250.The previous week was unrevised.
2017-04-19T19:15:50.974-04:00Some interesting comments from Dave Altig, Nicholas Parker and Brent Meyer at Macroblog: The Fed’s Inflation Goal: What Does the Public Know?
[O]ne natural question is whether the public is aware of this 2 percent target. We've posed this question a few times to our Business Inflation Expectations Panel, which is a set of roughly 450 private, nonfarm firms in the Southeast. These firms range in size from large corporations to owner operators.Thursday:
Unsurprisingly, to us at least—and maybe to you if you're a regular macroblog reader—the typical respondent answered 2 percent (the same answer our panel gave us in 2015 and back in 2011). At a minimum, southeastern firms appear to have gotten and retained the message.
In a follow-up to our question about the numerical target, in the latest survey we asked our panel whether they thought the Fed was more, less, or equally likely to tolerate inflation below or above its target.
One in five respondents believes the Federal Reserve is more likely to accept inflation above its target, while nearly 40 percent believe it is more likely to accept inflation below its target. Twenty-five percent of firms believe the Federal Reserve is equally likely to accept inflation above or below its target. The remainder of respondents were unsure. This pattern was similar across firm sizes and industries.
In other words, more firms see the inflation target as a threshold (or ceiling) that the Fed is averse to crossing than see it as a symmetric target.
2017-04-19T14:07:04.966-04:00Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Richmond based on information collected on or before April 10, 2017."Economic activity increased in each of the twelve Federal Reserve Districts between mid-February and the end of March, with the pace of expansion equally split between modest and moderate. In addition, the pickup was evident to varying degrees across economic sectors. Manufacturing continued to expand at a modest to moderate pace, although growth in freight shipments slowed slightly. Consumer spending varied as reports of stronger light vehicle sales were accompanied by somewhat softer readings in non-auto retail spending. Tourism and travel activity generally picked up. On balance, reports suggested that residential construction growth accelerated somewhat even as growth in home sales slowed, in part due to a lack of inventory. Nonresidential construction remained strong, but became more mixed in some regions; leasing activity generally improved at a more modest pace. More than half of the reports suggested that loan volumes increased, while only one said they were down modestly. Non-financial services generally continued to expand steadily. Energy-related businesses noted improved conditions while agricultural conditions varied. ...Employment expanded across the nation and increases ranged from modest to moderate during this period. Labor markets remained tight, and employers in most Districts had more difficulty filling low-skilled positions, although labor demand was stronger for higher skilled workers. Modest wage increases broadened, and reports noted bigger increases for workers with skills that are in short supply. A larger number of firms mentioned higher turnover rates and more difficulty retaining workers. A couple of Districts reported that worker shortages and increased labor costs were restraining growth in some sectors, including manufacturing, transportation, and construction. Businesses generally expected labor demand to increase moderately in the next six months, and looked for modest wage growth.emphasis addedAnd a few excerpts on real estate:Boston: Residential real estate markets in the First District continued to struggle with a shortage of inventory. All six First District states as well as the Greater Boston area reported large declines in inventory for both single-family homes and condos from February 2016 to February 2017. ... New York: Housing markets across the District have been mixed but, on balance a bit stronger since the last report, with ongoing slack at the high end of the market. New York City's rental market has been steady to somewhat weaker. Landlord concessions have grown more prevalent in an effort to keep rents and vacancy rates steady. Effective rents (factoring in these concessions) have continued to decline--particularly on larger units and particularly in Manhattan. Elsewhere, rents continued to rise in northern New Jersey but were mostly flat across upstate New York. ... San Franciso: Conditions in real estate markets remained stable, and activity remained strong in most of the District. Demand for residential real estate remained robust in most parts of the District. Overall, contacts reported that construction activity was slowed only by a lack of available land, labor, and materials. Sales of new and existing homes were robust, and inventories remained low, with one contact in Seattle reporting that new property listings remained on the market for only a couple of days.Mostly inventories are low, and rents are soft. [...]
2017-04-19T09:55:02.092-04:00Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.
The first quarter of the year ended on a positive note for the Architecture Billings Index (ABI). 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 March ABI score was 54.3, up from a score of 50.7 in the previous month. This score reflects a sizable increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 59.8, down from a reading of 61.5 the previous month, while the new design contracts index dipped from 54.7 to 52.3.(image) Click on graph for larger image.
“The first quarter started out on uneasy footing, but fortunately ended on an upswing entering the traditionally busy spring season,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “All sectors showed growth except for the commercial/industrial market, which, for the first time in over a year displayed a decrease in design services.”
• Regional averages: Midwest (54.6), South (52.6), Northeast (52.4), West (50.2)
• Sector index breakdown: multi-family residential (54.6), mixed practice (53.7), institutional (52.9), commercial / industrial (49.8)
2017-04-19T07:00:14.663-04:00From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey
Mortgage applications decreased 1.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending April 14, 2017. This week’s results do not include an adjustment for the Good Friday holiday.(image) Click on graph for larger image.
... The Refinance Index increased 0.2 percent from the previous week. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 1 percent lower than the same week one year ago.
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($424,100 or less) decreased to its lowest level since November 2016, 4.22 percent, from 4.28 percent, with points decreasing to 0.35 from 0.38 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
2017-04-18T20:39:45.556-04:00From Matthew Graham at Mortgage News Daily: Rates Pushing Deep Into Post-Election Range
After stumbling just slightly yesterday, mortgage rates returned to their recent habit of setting new 2017 lows today. At this point, we're getting closer and closer to post-election lows. You'd have to go all the way back to November, 14th 2016 to see anything lower.Wednesday:
In specific terms, even more lenders have joined the majority in quoting conventional 30yr fixed rates of 4.0% on top tier scenarios. The more aggressive lenders are now back into the high 3% territory (3.875% mainly, with a very small minority at 3.75%). Many lenders are quoting the same NOTE rates as yesterday, but today's upfront costs are moderately lower on average.
2017-04-18T14:01:00.165-04:00From the Philly Fed:
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for February 2017. Over the past three months, the indexes increased in 47 states, decreased in two, and remained stable in one, for a three-month diffusion index of 90. In the past month, the indexes increased in 44 states, decreased in four, and remained stable in two, for a one-month diffusion index of 80.Note: These are coincident indexes constructed from state employment data. An explanation from the Philly Fed:
The coincident indexes combine four state-level indicators to summarize current economic conditions in a single statistic. The four state-level variables in each coincident index are nonfarm payroll employment, average hours worked in manufacturing, the unemployment rate, and wage and salary disbursements deflated by the consumer price index (U.S. city average). The trend for each state’s index is set to the trend of its gross domestic product (GDP), so long-term growth in the state’s index matches long-term growth in its GDP.(image) Click on graph for larger image.
2017-04-18T11:45:20.519-04:00Earlier: Housing Starts decreased to 1.215 Million Annual Rate in MarchThe housing starts report released this morning showed starts were down in March compared to February, and were up 9.2% year-over-year compared to March 2016.Note that multi-family is frequently volatile month-to-month, and has seen especially wild swings over the last six months.This first graph shows the month to month comparison between 2016 (blue) and 2017 (red).Click on graph for larger image.Starts were up 9.2% in March 2017 compared to March 2016, and starts are up 8.1% year-to-date. My guess is starts will increase around 3% to 7% in 2017.This is a solid start to 2017, however the comparison was pretty easy in March.Below 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. The blue line is for multifamily starts and the red line is for multifamily completions. The rolling 12 month total for starts (blue line) increased steadily over the last few years - but has been moving more sideways recently. Completions (red line) have lagged behind - but completions have been generally catching up (more deliveries). Completions lag starts by about 12 months.I think most of the growth in multi-family starts is probably behind us - in fact multi-family starts probably peaked in June 2015 (at 510 thousand SAAR) - although I expect solid multi-family starts for a few more years (based on demographics).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.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 a few years of increasing single family starts and completions.[...]
2017-04-18T09:23:47.084-04:00From the Fed: Industrial production and Capacity Utilization
Industrial production increased 0.5 percent in March after moving up 0.1 percent in February. The increase in March was more than accounted for by a jump of 8.6 percent in the output of utilities—the largest in the history of the index—as the demand for heating returned to seasonal norms after being suppressed by unusually warm weather in February. Manufacturing output fell 0.4 percent in March, led by a large step-down in the production of motor vehicles and parts; factory output aside from motor vehicles and parts moved down 0.2 percent. The production at mines edged up 0.1 percent. For the first quarter as a whole, industrial production rose at an annual rate of 1.5 percent. At 104.1 percent of its 2012 average, total industrial production in March was 1.5 percent above its year-earlier level. Capacity utilization for the industrial sector increased 0.4 percentage point in March to 76.1 percent, a rate that is 3.8 percentage points below its long-run (1972–2016) average.(image) Click on graph for larger image.
2017-04-18T08:39:14.207-04:00From the Census Bureau: Permits, Starts and Completions
Housing Starts:(image) Click on graph for larger image.
Privately-owned housing starts in March were at a seasonally adjusted annual rate of 1,215,000. This is 6.8 percent below the revised February estimate of 1,303,000, but is 9.2 percent above the March 2016 rate of 1,113,000. Single-family housing starts in March were at a rate of 821,000; this is 6.2 percent below the revised February figure of 875,000. The March rate for units in buildings with five units or more was 385,000.
Privately-owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,260,000. This is 3.6 percent above the revised February rate of 1,216,000 and is 17.0 percent above the March 2016 rate of 1,077,000. Single-family authorizations in March were at a rate of 823,000; this is 1.1 percent below the revised February figure of 832,000. Authorizations of units in buildings with five units or more were at a rate of 401,000 in March.
2017-04-18T20:36:25.853-04:00From Matthew Graham at Mortgage News Daily: Mortgage Rates Fairly Steady Near 2017 Lows
For the third day in a row, mortgage rates set new 2017 lows this morning. But as bond markets weakened into the afternoon, several lenders recalled rate sheets for "negative reprices." This brought the afternoon's rate sheet offerings back in line with those seen on Thursday afternoon. Although that's slightly worse than this morning, rates are still effectively at 2017 lows.Tuesday:
The average lender continues to quote 4.0% on top tier conventional 30yr fixed scenarios. Any changes from Thursday would be seen in the form of slightly higher upfront costs. Many borrowers will see no difference.
2017-04-21T10:13:06.540-04:00From housing economist Tom Lawler:
2017-04-17T13:02:11.632-04:00This is a key housing market to follow since Phoenix saw a large bubble and bust, followed by strong investor buying.The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):1) Overall sales in March were up 8.8% year-over-year. 2) Cash Sales (frequently investors) were down to 23.9% of total sales.3) Active inventory is now down 9.8% year-over-year. More inventory (a theme in most of 2014) - and less investor buying - suggested price increases would slow sharply in 2014. And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.In 2015, with falling inventory, prices increased a little faster. Prices were up 6.3% in 2015 according to Case-Shiller. With flat inventory in 2016, prices were up 4.8%.This is the fifth consecutive month with a YoY decrease in inventory following eight months with YoY increases. March Residential Sales and Inventory, Greater Phoenix Area, ARMLS SalesYoYChangeSalesCashSalesPercentCashActiveInventoryYoYChangeInventoryMar-084,303---82219.1%57,0811---Mar-097,63677.5%2,99439.2%49,743-12.9%Mar-108,96917.5%3,74541.8%42,755-14.0%Mar-119,92710.7%4,94649.8%37,632-12.0%Mar-128,868-10.7%4,22247.6%21,863-41.9%Mar-138,146-8.1%3,38441.5%20,729-5.2%Mar-146,708-17.7%2,22233.1%30,16745.5%Mar-157,88417.5%2,17227.5%26,623-11.7%Mar-168,5558.5%2,10724.6%27,5803.6%Mar-179,3048.8%2,22623.9%24,871-9.8%1 March 2008 probably included pending listings[...]
2017-04-17T10:05:30.452-04:00The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 68 in April, down from 71 in March. Any number above 50 indicates that more builders view sales conditions as good than poor.
Builder confidence in the market for newly-built single-family homes remained solid in April, falling three points to a level of 68 on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after an unusually high March reading.(image) Click on graph for larger image.
“Even with this month’s modest drop, builder confidence is on very firm ground, and builders are reporting strong interest among potential home buyers,” said NAHB Chairman Granger MacDonald, a home builder and developer from Kerrville, Texas.
“The fact that the HMI measure of current sales conditions has been over 70 for five consecutive months shows that there is continued demand for new construction,” said NAHB Chief Economist Robert Dietz. “However, builders are facing several challenges, such as hefty regulatory costs and ongoing increases in building material prices."
All three HMI components posted losses in April but remain at healthy levels. The components gauging current sales conditions fell three points to 74 while the index charting sales expectations in the next six months dropped three points to 75. Meanwhile, the component measuring buyer traffic edged one point down to 52.
Looking at the three-month moving averages for regional HMI scores, the West and Midwest both rose one point to 77 and 68, respectively. The South held steady at 68, and the Northeast fell two points to 46.
2017-04-17T08:56:21.647-04:00From the NY Fed: Empire State Manufacturing Survey: General Business Conditions Index Fell Eleven Points to 5.2
Responses from New York State manufacturers suggested that business activity expanded at a considerably slower pace than in the prior two months. Although the general business conditions index remained above the levels seen through most of 2016, it slipped eleven points to 5.2. ...This was well below the consensus forecast of 15.(image)
Employment indexes continued to signal strength in the labor market. The index for number of employees climbed another five points to 13.9—its highest level in just over two years. ...
Forward-looking indexes were mixed but generally at high levels, suggesting fairly widespread optimism about future conditions. The index for future business conditions rose three points to 39.9, while the future new orders and shipments indexes declined modestly. Employment and hours worked were expected to increase fairly briskly in the months ahead.