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Finance and Economics

Updated: 2017-04-23T08:05:20.887-04:00


Schedule for Week of Apr 23, 2017


The key economic reports this week are Q1 GDP and March New Home sales.

----- Monday, Apr 24th -----

8:30 AM: Chicago Fed National Activity Index for March. This is a composite index of other data.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for April.

----- Tuesday, Apr 25th-----

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

(image) 9:00 AM ET: S&P/Case-Shiller House Price Index for February. Although this is the February report, it is really a 3 month average of December, January and February prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the January 2017 report (the Composite 20 was started in January 2000).

The consensus is for a 5.8% year-over-year increase in the Comp 20 index for February.

(image) 10:00 AM ET: New Home Sales for March from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the February sales rate.

The consensus is for a decrease in sales to 584 thousand Seasonally Adjusted Annual Rate (SAAR) in March from 592 thousand in February.

10:00 AM: Richmond Fed Survey of Manufacturing Activity for April.

----- Wednesday, Apr 26th -----

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

----- Thursday, Apr 26th -----

8:30 AM ET: The initial weekly unemployment claims report will be released. The consensus is for 243 thousand initial claims, down from 244 thousand the previous week.

8:30 AM: Durable Goods Orders for February from the Census Bureau. The consensus is for a 1.1% increase in durable goods orders.

10:00 AM: Pending Home Sales Index for March. The consensus is for a 0.4% decrease in the index.

10:00 AM: the Q1 2017 Housing Vacancies and Homeownership from the Census Bureau.

11:00 AM: the Kansas City Fed manufacturing survey for April. This is the last of the regional Fed surveys for April.

----- Friday, Apr 28th -----

8:30 AM: Gross Domestic Product, 1st quarter 2017 (Advance estimate). The consensus is that real GDP increased 1.1% annualized in Q1.

9:45 AM: Chicago Purchasing Managers Index for April. The consensus is for a reading of 56.5, down from 57.7 in March.

10:00 AM: University of Michigan's Consumer sentiment index (final for April). The consensus is for a reading of 98.0, unchanged from the preliminary reading 98.0. (image)

OIl: Decent increase for Oil Rig Count


A few comments from Steven Kopits of Princeton Energy Advisors LLC on Apr 21, 2017:
• Total US oil rigs were up 5 to 688

• 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
(image) Click on graph for larger image.

CR note: This graph shows the evolution of the EIA's Short-Term Energy Outlook (STEO) production forecasts by month. The production outlook keeps increasing.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.(image)

BLS: March Unemployment Rates in Arkansas, Colorado, Maine and Oregon at New Series Lows


From 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.
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.
emphasis added
(image) Click on graph for larger image.

This graph shows the current unemployment rate for each state (red), and the max during the recession (blue). All states are well below the maximum unemployment rate for the recession.

The size of the blue bar indicates the amount of improvement.   The yellow squares are the lowest unemployment rate per state since 1976.

The states are ranked by the highest current unemployment rate. New Mexico, at 6.7%, had the highest state unemployment rate.

(image) The second graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 2006. At the worst of the employment recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently no state has an unemployment rate at or above 7% (light blue); Only two states are at or above 6% (dark blue). The states are New Mexico (6.7%), and Alaska (6.4%).

Note: The series low for Alaska is 6.3% (almost a new low in Alaska too).(image)

A Few Comments on March Existing Home Sales


Earlier: NAR: "Existing-Home Sales Jumped 4.4% in March"

A few key points:

1) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus.  See: Lawler: Early Read on Existing Home Sales 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.

3) Inventory is still very low and falling year-over-year (down 6.6% year-over-year in March). More inventory would probably mean smaller price increases, and less inventory somewhat larger price increases.

I expect inventory will be increasing year-over-year by the end of 2017.

The following graph shows existing home sales Not Seasonally Adjusted (NSA).

(image) Click on graph for larger image.

Sales NSA in March (red column) were the highest for March since 2006 (NSA).

Note that sales NSA are now in the seasonally strong period (March through September).(image)

NAR: "Existing-Home Sales Jumped 4.4% in March"


From 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).

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).
emphasis added
(image) Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in March (5.71 million SAAR) were 4.4% higher than last month, and were 5.9% above the March 2016 rate.

The second graph shows nationwide inventory for existing homes.

(image) According to the NAR, inventory increased to 1.83 million in March from 1.75 million in February.   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.

(image) Inventory decreased 6.6% year-over-year in March compared to March 2016.  

Months of supply was at 3.8 months in March.

This was above consensus expectations. For existing home sales, a key number is inventory - and inventory is still low. I'll have more later ...(image)

Black Knight: Mortgage Delinquencies Declined in March to 11 Year Low


From 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 century

  • 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
According 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.

The percent of loans in the foreclosure process declined 4.6% in March and were down 29.2% 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 3.62% in March, down from 4.21% in February.

The percent of loans in the foreclosure process declined in March to 0.88%.

The number of delinquent properties, but not in foreclosure, is down 231,000 properties year-over-year, and the number of properties in the foreclosure process is down 183,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
In Foreclosure0.88%0.93%1.25%1.68%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:1,831,0002,135,0002,062,0002,349,000
Number of properties in foreclosure pre-sale inventory:448,000470,000631,000846,000
Total Properties2,279,0002,605,0002,693,0003,195,000

Friday: Existing Home Sales


I expect existing home sales to be above the consensus forecast, see: Lawler: Early Read on Existing Home Sales in March

• At 10:00 AM ET, Existing Home Sales for March from the National Association of Realtors (NAR). The consensus is for 5.61 million SAAR, up from 5.48 million in February.

• Also at 10:00 AM, Regional and State Employment and Unemployment (Monthly) for March 2017(image)

Hotels: Hotel Occupancy Rate Decreases Year-over-Year


From 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.

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
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

(image) The red line is for 2017, dashed is 2015, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.

2015 was the best year on record for hotels.

For hotels, occupancy will now move mostly sideways until the summer travel season.

Data Source: STR, Courtesy of

NMHC: Apartment Market Tightness Index remained negative in April Survey


From 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.

“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.
emphasis added
Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading below 50 indicates looser conditions from the previous quarter. This indicates market conditions were looser over the last quarter.

As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010.

This is the sixth consecutive quarterly survey indicating looser conditions - it appears supply has caught up with demand - and I expect rent growth to continue to slow.(image)

Philly Fed: Manufacturing "Continued to expand, but at a slower pace" in April


Earlier 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.
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.
emphasis added
Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

(image) Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through April), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

This suggests the ISM manufacturing index will show slower expansion in April (but still solid).(image)

Weekly Initial Unemployment Claims increase to 244,000


The 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.
emphasis added
The previous week was unrevised.

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 243,000.

This was at the consensus forecast.

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

Thursday: Unemployment Claims, Philly Fed Mfg Survey


Some 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.

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.
emphasis added
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 244 thousand initial claims, up from 234 thousand the previous week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for April. The consensus is for a reading of 26.0, down from 32.8.(image)

Fed's Beige Book: Modest to Moderate expansion, Tight labor markets


Fed'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. [...]

AIA: Architecture Billings Index increased in March


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

From the AIA: Architecture Billings Index continues to strengthen
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.

“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)
emphasis added
(image) Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 54.3 in January, up from 50.7 in February. 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)

MBA: Mortgage Applications Decrease in Latest Weekly Survey


From 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.

... 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.
emphasis added
(image) Click on graph for larger image.

The first graph shows the refinance index since 1990.

Refinance activity remains 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.

However refinance activity has declined significantly since rates increased.(image)

Wednesday: Beige Book


From 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.

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.  
emphasis added
• 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 March (a leading indicator for commercial real estate).

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.(image)

Philly Fed: State Coincident Indexes increased in 44 states in February


From 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.

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 February 46 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.

(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)

Comments on March Housing Starts


Earlier: 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.[...]

Industrial Production increased 0.5% in March


From 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.
emphasis added
(image) Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 9.4 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 76.1% is 3.8% below the average from 1972 to 2015 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

(image) The second graph shows industrial production since 1967.

Industrial production increased in March to 104.1. This is 19.6% above the recession low, and is close to the pre-recession peak.

This was close to expectations.(image)

Housing Starts decreased to 1.215 Million Annual Rate in March


From the Census Bureau: Permits, Starts and Completions
Housing Starts:
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.

Building Permits:
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.
emphasis added
(image) Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) decreased in March compared to February.  Multi-family starts are up year-over-year.

Multi-family is volatile.

Single-family starts (blue) increased in March, and are up 9.3% year-over-year.

(image) The second graph shows total and single unit starts since 1968.

 The second graph shows the huge collapse following the housing bubble, and then - after moving sideways for a couple of years - housing is now recovering (but still historically low),

Total housing starts in March were below expectations.  However February starts were revised up slightly.  Still a decent report.  I'll have more later ...(image)

Tuesday: Housing Starts, Industrial Production


From 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.

  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.
emphasis added
• At 8:30 AM ET, Housing Starts for March. The consensus is for 1.262 million, down from the February rate of 1.288 million.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for March. The consensus is for a 0.4% increase in Industrial Production, and for Capacity Utilization to increase to 76.0%.(image)

Lawler: Early Read on Existing Home Sales in March


From housing economist Tom Lawler:

Based on publicly available state and local realtor/MLS reports released through today, 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, up 4.7% from February’s preliminary pace and up 6.5% from last March’s seasonally adjusted pace. Local realtor/MLS data also suggest that active listings increased by more this March than last March, and my “best guess” is that the NAR’s March inventory estimate will be 1.86 million, up 6.3% from February’s preliminary estimate and down 5.1% from last March’s estimate. Finally, local realtor/MLS data suggest that the NAR’s estimate for the median existing SF home sales price in March will be about 7.5% higher than last March’s estimate.

CR Note: The NAR is scheduled to release existing home sales for March on Friday. The consensus forecast is for sales of 5.61 million SAAR (take the over this month!).(image)

Phoenix Real Estate in March: Sales up 9%, Inventory down 10% YoY


This 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[...]

NAHB: Builder Confidence decreased to 68 in April


The 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.

From NAHB: Builder Confidence Holds Firm in April
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.

“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.
emphasis added
(image) Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was slightly below the consensus forecast but still a solid reading.(image)

NY Fed: Empire State Manufacturing Index indicates slower expansion in April


From 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. ...

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.
emphasis added
This was well below the consensus forecast of 15.(image)