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Updated: 2017-05-26T14:44:53.563-04:00

 



Freddie Mac: Mortgage Serious Delinquency rate unchanged in April

2017-05-26T14:44:53.586-04:00

Freddie Mac reported that the Single-Family serious delinquency rate in April was at 0.92%, unchanged from 0.92% in March.  Freddie's rate is down from 1.15% in April 2016.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

This matches last month as the lowest serious delinquency rate since May 2008.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

(image) Click on graph for larger image

Although the rate is still declining, the rate of decline has slowed.

Maybe the rate will decline another 0.2 to 0.4 percentage points or so to a cycle bottom, but this is pretty close to normal.

Note: Fannie Mae will report for April soon.(image)



Q2 GDP Forecasts

2017-05-26T11:54:27.869-04:00

From Merrill Lynch:
[T]he data [today] pushed down 2Q GDP tracking by a tenth to 2.5% qoq saar. The main drag was from the weak durables report, while revisions to 1Q GDP caused some modest shifts in the 2Q components.
From the Altanta Fed: GDPNow
The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2017 is 3.7 percent on May 26, down from 4.1 percent on May 16. The forecast for second-quarter real residential investment growth fell from 8.3 percent to 3.1 percent after Tuesday's housing related releases from the U.S. Census Bureau and Wednesday's existing-home sales release from the National Association of Realtors.
emphasis added
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 2.2% for 2017:Q2.

News from this week’s data releases reduced the nowcast for 2017:Q2 by 0.1 percentage point as the positive impact from wholesale inventories data was more than offset by the negative impact from the advance durable goods report and new home sales data.
(image)



Q1 GDP Revised up to 1.2% Annual Rate

2017-05-26T09:48:01.705-04:00

From the BEA: Gross Domestic Product: First Quarter 2017 (Second Estimate)
Real gross domestic product (GDP) increased at an annual rate of 1.2 percent in the first quarter of 2017, according to the "second" estimate released by the Bureau of Economic Analysis. In the fourth quarter, real GDP increased 2.1 percent.

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 0.7 percent. With this second estimate for the first quarter, the general picture of economic growth remains the same; increases in nonresidential fixed investment and in personal consumption expenditures (PCE) were larger and the decrease in state and local government spending was smaller than previously estimated. These revisions were partly offset by a larger decrease in private inventory investment ...
emphasis added
Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 0.3% to 0.6%. (weak PCE). Residential investment was revised up slightly from 13.7% to +13.8%. This was above the consensus forecast.(image)



Friday: GDP

2017-05-25T21:56:00.861-04:00

Friday:
• At 8:30 AM ET, Durable Goods Orders for April from the Census Bureau. The consensus is for a 0.9% decrease in durable goods orders.

• Also at 8:30 AM ET, Gross Domestic Product, 1st quarter 2017 (Second estimate). The consensus is that real GDP increased 0.8% annualized in Q1, up from the advance estimate of 0.7%.

• At 10:00 AM, University of Michigan's Consumer sentiment index (final for May). The consensus is for a reading of 97.6, down from the preliminary reading 97.7. (image)



Philly Fed: State Coincident Indexes increased in 41 states in April

2017-05-25T13:48:13.938-04:00

From the Philly Fed:
The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for April 2017. Over the past three months, the indexes increased in 46 states and decreased in four, for a three-month diffusion index of 84. In the past month, the indexes increased in 41 states and decreased in nine, for a one-month diffusion index of 64.
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.

This is a graph is of the number of states with one month increasing activity according to the Philly Fed. This graph includes states with minor increases (the Philly Fed lists as unchanged).

In April, 41 states had increasing activity (including minor increases).

The downturn in 2015 and 2016, in the number of states increasing, was mostly related to the decline in oil prices.   The reason for the recent decrease in the number of states with increasing activity is unclear - and might be revised away.

(image) Here is a map of the three month change in the Philly Fed state coincident indicators. This map was all red during the worst of the recession, and almost all green now.

Source: Philly Fed. Note: For complaints about red / green issues, please contact the Philly Fed.(image)



Kansas City Fed: Regional Manufacturing Activity "Expanded Modestly" in May

2017-05-25T11:00:03.550-04:00

From the Kansas City Fed: Tenth District Manufacturing Activity Expanded Modestly
The Federal Reserve Bank of Kansas City released the May Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded moderately with strong expectations for future activity.

“After slowing from a rapid rate of growth in February and March, we’ve seen more moderate growth the past two months,” said Wilkerson.  “But firms are about as optimistic about future growth as they’ve ever been.”
...
The month-over-month composite index was 8 in May, up from 7 in April but down from 20 in March.  The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes.  Activity at durable manufacturing plants eased slightly but remained positive, while nondurable activity improved, particularly for plastics and chemicals.  Month-over-month indexes were mixed with little change overall.  The production and shipments indexes edged slightly lower, while the employment and order backlog indexes inched higher.  The new orders and new orders for exports indexes were both basically unchanged.  The finished goods inventory index fell from 8 to 0, while the raw materials inventory index was stable. 
emphasis added
The Kansas City region was hit hard by the decline in oil prices, but activity is expanding again. (image)



Weekly Initial Unemployment Claims increase to 234,000

2017-05-25T08:34:45.383-04:00

The DOL reported:
In the week ending May 20, the advance figure for seasonally adjusted initial claims was 234,000, an increase of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 232,000 to 233,000. The 4-week moving average was 235,250, a decrease of 5,750 from the previous week's revised average. This is the lowest level for this average since April 14, 1973 when it was 232,750. The previous week's average was revised up by 250 from 240,750 to 241,000.
emphasis added
The previous week was revised up by 1,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

(image) Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 235,250 - the lowest since 1973.

This was lower than the consensus forecast.

The low level of claims suggests relatively few layoffs.(image)



Thursday: Unemployment Claims

2017-05-24T19:14:09.734-04:00

Some interesting analysis from Josh Lehner at the Oregon Office of Economic Analysis: States at Full Employment, A Prime-Age EPOP Story
The key economic question economists are trying to answer today is whether or not the U.S. economy is at full employment. Given it is more a concept then a hard calculation, you look for signs in the data that suggest the economy is there. In terms of jobs and the unemployment rate, there is no question the data do suggest this. However, at least nationally, wage growth is still relatively slow, albeit picking up some, and inflation remains consistently below target.

Here in Oregon we’re checking more of the boxes than the U.S. overall. Not only have we seen stronger wage gains, but we got the labor force response in terms of rising participation rates. Furthermore, now that the labor market is tight, we are seeing slower job growth which is also expected. Again, I don’t think we’re quite there just yet, but in looking across the nation it’s clear that Oregon is closer than most states.
...
Specifically, when it comes the share of the prime working-age population that actually has a job, those between 25 and 54 years old, just two — two! — states are back to where they were last decade, let alone the late 1990s.
The decline in the prime working age EPOP is a long term trend, and I suspect that after adjusted for the long term trend, and maybe a little for population (the 50 to 54 age cohort has a lower participation rate than most other prime cohorts), more states would be back to the levels of a decade ago.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 237 thousand initial claims, up from 232 thousand the previous week.

• At 11:00 AM, the Kansas City Fed manufacturing survey for May.(image)



Black Knight: Mortgage Delinquencies Increased in April

2017-05-24T15:07:38.568-04:00

From Black Knight: Black Knight Financial Services’ First Look at April 2017 Mortgage Data
• First-lien mortgage delinquencies rose by 13 percent, the largest monthly increase since November 2008

• Month-over-month, the number of borrowers past due on mortgage payments increased by 241,000

• April’s delinquency rate increase was primarily calendar-driven (due to both the month ending on a Sunday and March being the typical calendar-year low) and largely isolated to early-stage delinquencies

• The inventory of loans in active foreclosure continues to decline, hitting a 10-year low in April

• At just 52,800, April saw the fewest monthly foreclosure starts since January 2005
According to Black Knight's First Look report for April, the percent of loans delinquent increased 12.9% in April compared to March, and declined 3.6% year-over-year.

The percent of loans in the foreclosure process declined 3.5% in April and were down 27.3% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 4.08% in April, up from 3.62% in March.

The percent of loans in the foreclosure process declined in April to 0.85%.

The number of delinquent properties, but not in foreclosure, is down 74,000 properties year-over-year, and the number of properties in the foreclosure process is down 162,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
  Apr
2017
Mar
2017
Apr
2016
Apr
2015
Delinquent4.08%3.62%4.24%4.72%
In Foreclosure0.85%0.88%1.17%1.63%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:2,072,0001,831,0002,146,0002,381,000
Number of properties in foreclosure pre-sale inventory:433,000448,000820,0001,064,000
Total Properties2,505,0002,279,0002,741,0003,201,000
(image)



FOMC Minutes: More details on Balance Sheet Reduction

2017-05-24T14:05:51.364-04:00

From the Fed: Minutes of the Federal Open Market Committee, May 2-3, 2017. Excerpts:
Participants continued their discussion of issues related to potential changes to the Committee's policy of reinvesting principal payments from securities held in the SOMA. The staff provided a briefing that summarized a possible operational approach to reducing the System's securities holdings in a gradual and predictable manner. Under the proposed approach, the Committee would announce a set of gradually increasing caps, or limits, on the dollar amounts of Treasury and agency securities that would be allowed to run off each month, and only the amounts of securities repayments that exceeded the caps would be reinvested each month. As the caps increased, reinvestments would decline, and the monthly reductions in the Federal Reserve's securities holdings would become larger. The caps would initially be set at low levels and then be raised every three months, over a set period of time, to their fully phased-in levels. The final values of the caps would then be maintained until the size of the balance sheet was normalized.

Nearly all policymakers expressed a favorable view of this general approach. Policymakers noted that preannouncing a schedule of gradually increasing caps to limit the amounts of securities that could run off in any given month was consistent with the Committee's intention to reduce the Federal Reserve's securities holdings in a gradual and predictable manner as stated in the Committee's Policy Normalization Principles and Plans. Limiting the magnitude of the monthly reductions in the Federal Reserve's securities holdings on an ongoing basis could help mitigate the risk of adverse effects on market functioning or outsized effects on interest rates. The approach would also likely be fairly straightforward to communicate. Moreover, under this approach, the process of reducing the Federal Reserve's securities holdings, once begun, could likely proceed without a need for the Committee to make adjustments as long as there was no material deterioration in the economic outlook.

Policymakers agreed that the Committee's Policy Normalization Principles and Plans should be augmented soon to provide additional details about the operational plan to reduce the Federal Reserve's securities holdings over time. Nearly all policymakers indicated that as long as the economy and the path of the federal funds rate evolved as currently expected, it likely would be appropriate to begin reducing the Federal Reserve's securities holdings this year. Policymakers agreed to continue in June their discussion of plans for a change to the Committee's reinvestment policy.
emphasis added
(image)



A Few Comments on April Existing Home Sales

2017-05-24T11:59:17.784-04:00

Earlier: NAR: "Existing-Home Sales Slip 2.3 Percent in April"Two key points:1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus.  The NAR reported sales of  5.57 million SAAR, Lawler projected 5.56 million SAAR, and the consensus was 5.67 million SAAR.  See: Lawler: Early Read on Existing Home Sales in April "I project that US existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.56 million in April, down 2.6% from March’s preliminary pace and up 1.5% from last April’s seasonally adjusted pace."2) Inventory is still very low and falling year-over-year (down 9.0% year-over-year in April). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.I started the year expecting inventory would be increasing year-over-year by the end of 2017. That still seems possible, but inventory will have to start increasing a little pretty soon.The following graph shows existing home sales Not Seasonally Adjusted (NSA).Click on graph for larger image.Sales NSA in April (red column) were below April 2016. (NSA).Note that sales NSA are now in the seasonally strong period (March through September).And here is another update to the "distressing gap" graph that I first started posting a number of years ago to show the emerging gap caused by distressed sales.  Now I'm looking for the gap to close over the next several years.The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through April 2017. This graph starts in 1994, but the relationship had been fairly steady back to the '60s. Following the housing bubble and bust, the "distressing gap" appeared mostly because of distressed sales.   The gap has persisted even though distressed sales are down significantly, since new home builders focused on more expensive homes.I expect existing home sales to move more sideways, and I expect this gap to slowly close, mostly from an increase in new home sales. However, this assumes that the builders will offer some smaller, less expensive homes. If not, then the gap will persist.Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.[...]



AIA: Architecture Billings Index positive in April

2017-05-24T11:18:25.158-04:00

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

From the AIA: Design billings increasing entering height of construction season
After beginning the year with a marginal decline, the Architecture Billings Index has posted three consecutive months of growth in design revenue at architecture firms. 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 April ABI score was 50.9, down from a score of 54.3 in the previous month. This score still reflects an increase in design services (any score above 50 indicates an increase in billings). The new projects inquiry index was 60.2, up from a reading of 59.8 the previous month, while the new design contracts index increased from 52.3 to 53.2.

“Probably even better news for the construction outlook is that new project work coming into architecture firms has seen exceptionally strong growth so far this year,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “In fact, new project activity has pushed up project backlogs at architecture firm to their highest level since the design market began its recovery earlier this decade.”
...
• Regional averages: South (55.3), Midwest (53.3), West (50.9), Northeast (50.7)

• Sector index breakdown: institutional (54.0), mixed practice (53.4), commercial / industrial (52.4), multi-family residential (49.9)
emphasis added
(image) Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 50.9 in April, down from 54.3 the previous month. Anything above 50 indicates expansion 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.

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 9 of the last 12 months, suggesting a further increase in CRE investment in 2017 and early 2018.(image)



NAR: "Existing-Home Sales Slip 2.3 Percent in April"

2017-05-24T10:13:02.949-04:00

From the NAR: Existing-Home Sales Slip 2.3 Percent in April; Days on Market Falls to Under a MonthTotal existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, dipped 2.3 percent to a seasonally adjusted annual rate of 5.57 million in April from a downwardly revised 5.70 million in March. Despite last month's decline, sales are still 1.6 percent above a year ago and at the fourth highest pace over the past year. ...Total housing inventory at the end of April climbed 7.2 percent to 1.93 million existing homes available for sale, but is still 9.0 percent lower than a year ago (2.12 million) and has fallen year-over-year for 23 consecutive months. Unsold inventory is at a 4.2-month supply at the current sales pace, which is down from 4.6 months a year ago. emphasis addedClick on graph for larger image.This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993. Sales in April (5.57 million SAAR) were 2.3% lower than last month, and were 1.6% above the April 2016 rate.The second graph shows nationwide inventory for existing homes.According to the NAR, inventory increased to 1.93 million in April from 1.80 million in March.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory. Inventory decreased 9.0% year-over-year in April compared to April 2016.   Months of supply was at 4.2 months in April. This was below the consensus expectations. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...[...]



MBA: Mortgage Applications Increase in Latest Weekly Survey

2017-05-24T07:00:00.194-04:00

From the MBA: Refis Apps Up, Purchase Apps Slightly Down in Latest MBA Weekly Survey
Mortgage applications increased 4.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 19, 2017.

... The Refinance Index increased 11 percent from the previous week to its highest level since March 2017. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 3 percent higher 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, 4.17 percent, from 4.23 percent, with points increasing to 0.39 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
(image) Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity picked up a little as rates declined - but remains historically low - and will not increase significantly unless rates fall sharply.


(image) The second graph shows the MBA mortgage purchase index.

Even with the increase in mortgage rates late last year, purchase activity is still up 3% year-over-year.(image)



Wednesday: Existing Home Sales, FOMC Minutes and More

2017-05-23T20:18:08.814-04:00

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

• At 9:00 AM, FHFA House Price Index for March 2017. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 5.67 million SAAR, down from 5.71 million in March. Housing economist Tom Lawler estimates the NAR will report sales of 5.56 million SAAR for April.

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

• At 2:00 PM, FOMC Minutes for the Meeting of May 2 - 3, 2017(image)



Chemical Activity Barometer increases in May

2017-05-23T17:41:34.895-04:00

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Remains Strong but Hints at Slowing Pace of Economic Growth and Business Activity Into 2018
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 0.4 percent in May, following a downward revision of 0.1 percent for April. Compared to a year earlier, the CAB is up 5.0 percent year-over-year, a modest slowing that still suggests continued growth through year-end 2017. All data is measured on a three-month moving average (3MMA).
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to fourteen months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added
(image) Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production.  It does appear that CAB (red) generally leads Industrial Production (blue).

CAB has increased solidly over the last several months, and this suggests an increase in Industrial Production in 2017.(image)



Richmond Fed: Regional Manufacturing Activity Mostly Unchanged in May

2017-05-23T14:39:19.857-04:00

Earlier from the Richmond Fed: Manufacturing Firms were Somewhat Less Upbeat about Activity in May Compared to Prior Months
Manufacturers in the Fifth District were somewhat less upbeat in May than in the prior three months, according to the latest survey by the Federal Reserve Bank of Richmond. The index for shipments and the index for new orders decreased notably, with the shipments index falling to slightly below 0. The index for employment was relatively flat, but the decline in the other two indexes resulted in a decline in the composite index from 20 in April to 1 in May. The majority of firms continued to report higher wages, but more firms reported a decline in the average workweek than reported an increase. ...
emphasis added
Based on the regional surveys released so far, it appears manufacturing growth slowed in May. The ISM index will probably show slower growth this month. (image)



A few Comments on April New Home Sales

2017-05-23T12:26:12.000-04:00

New home sales for April were reported at 569,000 on a seasonally adjusted annual rate basis (SAAR).  This was well below the consensus forecast, however the three previous months combined were revised up significantly. Overall this was a decent report.

Sales were only up 0.5% year-over-year in April.

Earlier: New Home Sales decrease to 569,000 Annual Rate in April.

(image) Click on graph for larger image.

This graph shows new home sales for 2016 and 2017 by month (Seasonally Adjusted Annual Rate).  Sales were up 0.5% year-over-year in April.

For the first four months of 2017, new home sales are up 11.3% compared to the same period in 2016.

This was a strong year-over-year increase through April, however sales were weak in Q1 2016, so this was also an easy comparison.(image)



New Home Sales decrease to 569,000 Annual Rate in April

2017-05-23T10:24:16.987-04:00

The Census Bureau reports New Home Sales in April were at a seasonally adjusted annual rate (SAAR) of 569 thousand. The previous three months combined were revised up significantly."Sales of new single-family houses in April 2017 were at a seasonally adjusted annual rate of 569,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 11.4 percent below the revised March rate of 642,000, but is 0.5 percent above the April 2016 estimate of 566,000."emphasis addedClick on graph for larger image.The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.Even with the increase in sales over the last several years, new home sales are still fairly low historically.The second graph shows New Home Months of Supply.The months of supply increased in April to 5.7 months. The all time record was 12.1 months of supply in January 2009.This is now in the normal range (less than 6 months supply is normal)."The seasonally-adjusted estimate of new houses for sale at the end of April was 268,000. This represents a supply of 5.7 months at the current sales rate."On inventory, according to the Census Bureau: "A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted."Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.The third graph shows the three categories of inventory starting in 1973.The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).In April 2017 (red column), 54 thousand new homes were sold (NSA). Last year, 55 thousand homes were sold in April. The all time high for April was 116 thousand in 2005, and the all time low for April was 30 thousand in 2011.This was below expectations of 604,000 sales SAAR, however the previous months were revised up.   I'll have more later today. [...]



Tuesday: New Home Sales

2017-05-22T19:09:19.432-04:00

From Matthew Graham at Mortgage News Daily: Low and Sideways, Mortgage Rates Play Waiting Game
Mortgage rates were slightly higher for the 3rd straight day, continuing a modest bounce back from the year's lowest rates last Wednesday. ...

While the general movement in rates has been slightly higher, it hasn't lifted rates much above 2017's lows.  Especially when considered next to anything before last Wednesday, recent rate offerings have been low and the trend has been sideways.  Most lenders continue to offer conventional 30yr fixed rates of 4.0% on top tier scenarios.  The only difference from Friday would be marginally higher upfront costs, but several lenders are effectively "unchanged."
emphasis added
Tuesday:
• At 8:30 AM ET, New Home Sales for April from the Census Bureau. The consensus is for a decrease in sales to 604 thousand Seasonally Adjusted Annual Rate (SAAR) in April from 621 thousand in March.

• Also at 10:00 AM, Richmond Fed Survey of Manufacturing Activity for May.(image)



Merrill: "Revising down our inflation forecasts"

2017-05-22T11:25:00.172-04:00

A few excerpts from a Merrill Lynch research note: Revising down our inflation forecasts
After two consecutive disappointing CPI reports, it is clear that inflation is now set for a slower finish this year. After refreshing our models, we now see core CPI inflation ending the year at 1.9% 4Q/4Q, down from our prior forecast of 2.3% and slowing from 2.2% 4Q/4Q 2016 growth. The downgrade largely reflects transitory weakness from wireless telephone services that should revert next year, allowing for core CPI to accelerate back to 2.2% by the end of 2018.

We are also revising our core PCE inflation forecasts. Assuming we see a sluggish 0.1% mom reading in April, the trajectory for core PCE will be knocked lower as the % yoy clip drops to 1.5%. As a result, we take down our 4Q/4Q 2017 core PCE estimate to 1.7% yoy from 1.9%. That said, we continue to expect core PCE to hit 2% by the end of 2018, reaching the Fed’s target.

The main takeaway from these forecast changes is that inflation is still set to move higher, but it is happening later.
(image)



Chicago Fed "Increased Economic Growth in April"

2017-05-22T08:55:49.431-04:00

From the Chicago Fed: Chicago Fed National Activity Index Points to Increased Economic Growth in April
Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.49 in April from +0.07 in March. Two of the four broad categories of indicators that make up the index increased from March, and only one category made a negative contribution to the index in April. The index’s three-month moving average, CFNAI-MA3, increased to +0.23 in April from a neutral reading in March.
emphasis added
This graph shows the Chicago Fed National Activity Index (three month moving average) since 1967.

(image) Click on graph for larger image.

This suggests economic activity was above the historical trend in April (using the three-month average).

According to the Chicago Fed:
The index is a weighted average of 85 indicators of growth in national economic activity drawn from four broad categories of data: 1) production and income; 2) employment, unemployment, and hours; 3) personal consumption and housing; and 4) sales, orders, and inventories.
...
A zero value for the monthly index has been associated with the national economy expanding at its historical trend (average) rate of growth; negative values with below-average growth (in standard deviation units); and positive values with above-average growth.
(image)



Sunday Night Futures

2017-05-21T20:09:39.569-04:00

Weekend:
Schedule for Week of May 21, 2017

Monday:
• At 8:30 AM ET, Chicago Fed National Activity Index for April. This is a composite index of other data.

From CNBC: Pre-Market Data and Bloomberg futures: S&P futures are up 3, and DOW futures are up 19(fair value).

Oil prices were up over the last week with WTI futures at $50.73 per barrel and Brent at $53.61 per barrel.  A year ago, WTI was at $48, and Brent was at $49 - so oil prices are up about 5% to 8% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.36 per gallon - a year ago prices were at $2.29 per gallon - so gasoline prices are up about 7 cents a gallon year-over-year.(image)



Existing Home Sales: Take the Under

2017-05-21T14:15:42.416-04:00

The NAR will report April Existing Home Sales on Wednesday, May 24th at 10:00 AM ET.The consensus, according to Bloomberg, is that the NAR will report sales of 5.67 million. Housing economist Tom Lawler estimates the NAR will report sales of 5.56 million on a seasonally adjusted annual rate (SAAR) basis, down from 5.71 million SAAR in March.Housing economist Tom Lawler has been sending me his predictions of what the NAR will report for 7 years.  The table below shows the consensus for each month, Lawler's predictions, and the NAR's initial reported level of sales.  Lawler hasn't always been closer than the consensus, but usually when there has been a fairly large spread between Lawler's estimate and the "consensus", Lawler has been closer.NOTE: There have been times when Lawler "missed", but then he pointed out an apparent error in the NAR data - and the subsequent revision corrected that error.  As an example, see: The “Curious Case” of Existing Home Sales in the South in AprilOver the last seven years, the consensus average miss was 150 thousand, and  Lawler's average miss was 70 thousand.Many analysts now change their "forecast" after Lawler's estimate is posted, so the consensus has improved a little recently!Existing Home Sales, Forecasts and NAR Reportmillions, seasonally adjusted annual rate basis (SAAR)MonthConsensusLawlerNAR reported1May-106.205.835.66Jun-105.305.305.37Jul-104.663.953.83Aug-104.104.104.13Sep-104.304.504.53Oct-104.504.464.43Nov-104.854.614.68Dec-104.905.135.28Jan-115.205.175.36Feb-115.155.004.88Mar-115.005.085.10Apr-115.205.155.05May-114.754.804.81Jun-114.904.714.77Jul-114.924.694.67Aug-114.754.925.03Sep-114.934.834.91Oct-114.804.864.97Nov-115.084.404.42Dec-114.604.644.61Jan-124.694.664.57Feb-124.614.634.59Mar-124.624.594.48Apr-124.664.534.62May-124.574.664.55Jun-124.654.564.37Jul-124.504.474.47Aug-124.554.874.82Sep-124.754.704.75Oct-124.744.844.79Nov-124.905.105.04Dec-125.104.974.94Jan-134.904.944.92Feb-135.014.874.98Mar-135.034.894.92Apr-134.925.034.97May-135.005.205.18Jun-135.274.995.08Jul-135.135.335.39Aug-135.255.355.48Sep-135.305.265.29Oct-135.135.085.12Nov-135.024.984.90Dec-134.904.964.87Jan-144.704.674.62Feb-144.644.604.60Mar-144.564.644.59Apr-144.674.704.65May-144.754.814.89Jun-144.994.965.04Jul-145.005.095.15Aug-145.185.125.05Sep-145.095.145.17Oct-145.155.285.26Nov-145.204.904.93Dec-145.055.155.04Jan-155.004.904.82Feb-154.944.874.88Mar-155.045.185.19Apr-155.225.205.04May-155.255.295.35Jun-155.405.455.49Jul-155.415.645.59Aug-155.505.545.31Sep-155.355.565.55Oct-155.415.335.36Nov-155.324.974.76Dec-155.195.365.46Jan-165.325.365.47Feb-165.305.205.08Mar-165.275.275.33Apr-165.405.445.45May-165.645.555.53Jun-165.485.625.57Jul-165.525.415.39Aug-165.445.495.33Sep-165.355.555.47Oct-165.445.475.60Nov-165.545.605.61Dec-165.545.555.49Jan-175.555.605.69Feb-175.555.415.48Mar-175.615.745.71Apr-175.675.56---1NAR initially reported before revisions.[...]



Schedule for Week of May 21, 2017

2017-05-20T08:11:01.749-04:00

The key economic reports this week are April New and Existing Home sales, and the second estimate of Q1 GDP.----- Monday, May 22nd -----8:30 AM: Chicago Fed National Activity Index for April. This is a composite index of other data.----- Tuesday, May 23rd -----10:00 AM ET: New Home Sales for April from the Census Bureau. This graph shows New Home Sales since 1963. The dashed line is the March sales rate.The consensus is for a decrease in sales to 604 thousand Seasonally Adjusted Annual Rate (SAAR) in April from 621 thousand in March.10:00 AM: Richmond Fed Survey of Manufacturing Activity for May.----- Wednesday, May 24th -----7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.9:00 AM: FHFA House Price Index for March 2017. This was originally a GSE only repeat sales, however there is also an expanded index.10:00 AM: Existing Home Sales for April from the National Association of Realtors (NAR). The consensus is for 5.67 million SAAR, down from 5.71 million in March.Housing economist Tom Lawler estimates the NAR will report sales of 5.56 million SAAR for April.During the day: The AIA's Architecture Billings Index for April (a leading indicator for commercial real estate).2:00 PM: FOMC Minutes for the Meeting of May 2 - 3, 2017----- Thursday, May 25th -----8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 237 thousand initial claims, up from 232 thousand the previous week.11:00 AM: the Kansas City Fed manufacturing survey for May. ----- Friday, May 26th -----8:30 AM: Durable Goods Orders for April from the Census Bureau. The consensus is for a 0.9% decrease in durable goods orders.8:30 AM: Gross Domestic Product, 1st quarter 2017 (Second estimate). The consensus is that real GDP increased 0.8% annualized in Q1, up from the advance estimate of 0.7%.10:00 AM: University of Michigan's Consumer sentiment index (final for May). The consensus is for a reading of 97.6, down from the preliminary reading 97.7. [...]