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29 января, 19:00

Philly Fed: State Coincident Indexes increased in 37 states in December

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From the Philly Fed: The Federal Reserve Bank of Philadelphia has released the coincident indexes for the 50 states for December 2019. Over the past three months, the indexes increased in 39 states, decreased in eight states, and remained stable in three, for a threemonth diffusion index of 62. In the past month, the indexes increased in 37 states, decreased in nine states, and remained stable in four, for a one-month diffusion index of 56.emphasis addedNote: 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 by production workers, 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.Click on map for larger 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 all or mostly green during most of the recent expansion.The map is mostly green on a three month basis, but there are some red and gray states.Source: Philly Fed. Note: For complaints about red / green issues, please contact the Philly Fed.And here 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 December, 39 states had increasing activity including states with minor increases.

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29 января, 18:03

NAR: "Pending Home Sales Skid 4.9% in December"

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From the NAR: Pending Home Sales Skid 4.9% in DecemberPending home sales fell in December, taking a step back after increasing slightly in November, according to the National Association of Realtors®. Each of the four major regions reported a drop in month-over-month contract activity, with the South experiencing the steepest fall. However, year-over-year pending home sales activity was up nationally compared to one year ago.The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, fell 4.9% to 103.2 in December. Year-over-year contract signings increased 4.6%. An index of 100 is equal to the level of contract activity in 2001....All regional indices were down in December. The Northeast PHSI slipped 4.0% to 92.4 in December, 0.1% lower than a year ago. In the Midwest, the index dropped 3.6% to 98.8 last month, 1.3% higher than in December 2018.Pending home sales in the South decreased 5.5% to an index of 118.1 in December, a 7.4% increase from December 2018. The index in the West fell 5.4% in December 2019 to 93.1, an increase of 7.0% from a year ago.emphasis addedThis was well below expectations for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in January and February.

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29 января, 15:00

MBA: Mortgage Applications Increased in Latest Weekly Survey

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From the MBA: Mortgage Applications Increase in Latest MBA Weekly SurveyMortgage applications increased 7.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 24, 2020. This week’s results include an adjustment for the Martin Luther King Jr. Holiday.... The Refinance Index increased 8 percent from the previous week and was 146 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index increased 2 percent compared with the previous week and was 17 percent higher than the same week one year ago....“Mortgage applications continued their strong start to the year, as borrowers acted on the drop in mortgage rates last week. Rates were driven lower by investors’ increased concern about the economic impact from China’s coronavirus outbreak, in addition to existing concerns over trade and other geo-political risks,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “With the 30-year fixed rate at its lowest level since November 2016, refinances jumped 7.5 percent. Purchase applications grew 2 percent and were more than 16 percent higher than the same week last year. Thanks to low rates and the healthy job market, purchase activity continues to run stronger than in 2019.”...The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.81 percent from 3.87 percent, with points increasing to 0.28 from 0.27 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.emphasis addedClick on graph for larger image.The first graph shows the refinance index since 1990.With lower rates, we saw a sharp increase in refinance activity, but mortgage rates would have to decline further to see a huge refinance boom. The second graph shows the MBA mortgage purchase indexAccording to the MBA, purchase activity is up 17% year-over-year.

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29 января, 02:28

Wednesday: FOMC Statement and Press Conference, Pending Home Sales

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Wednesday:• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.• At 10:00 AM, Pending Home Sales Index for December. The consensus is for a 0.5% increase in the index.• At 2:00 PM, FOMC Meeting Announcement. No change to policy is expected at this meeting.• At 2:30 PM, Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

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28 января, 23:57

CBO Projection: Annual Budget Deficit to be above 4% GDP for the Next Decade

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Remember the promise that the 2017 Tax Cuts and Jobs Act (TCJA) would "pay for itself", and that the current administration would reduce the deficit? Hoocoodanode? ("Who could have known?",Popularized by my former co-blogger Tanta!)The Congressional Budget Office (CBO) released their new The Budget and Economic Outlook: 2020 to 2030 In CBO’s projections, the federal budget deficit is $1.0 trillion in 2020 and averages $1.3 trillion between 2021 and 2030. Projected deficits rise from 4.6 percent of gross domestic product (GDP) in 2020 to 5.4 percent in 2030.Other than a six-year period during and immediately after World War II, the deficit over the past century has not exceeded 4.0 percent for more than five consecutive years. And during the past 50 years, deficits have averaged 1.5 percent of GDP when the economy was relatively strong (as it is now).Because of the large deficits, federal debt held by the public is projected to grow, from 81 percent of GDP in 2020 to 98 percent in 2030 (its highest percentage since 1946). By 2050, debt would be 180 percent of GDP—far higher than it has ever beenemphasis addedThe CBO projects the deficit will above 4% for the next decade.  I think their projections are optimistic.Click on graph for larger image.This graph shows the actual (purple) budget deficit each year as a percent of GDP, and an estimate for the next ten years based on estimates from the CBO. Note: the Federal government's deficit usually increases sharply during a recession - it is the only entity that can be countercyclical - and then decreases during an expansion. So no one should compare the deficit to 2008 (under Bush) or 2009 (under Obama) during the great recession.From a policy perspective and using these projections, the TCJA was a policy failure on this issue (the TCJA was also a failure on GDP growth, business investment, and the typical tax cut for most Americans).

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28 января, 20:53

Update: A few comments on the Seasonal Pattern for House Prices

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CR Note: This is a repeat of earlier posts with updated graphs.A few key points:1) There is a clear seasonal pattern for house prices.2) The surge in distressed sales during the housing bust distorted the seasonal pattern.3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now overstating the seasonal change (second graph below).4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.For in depth description of these issues, see former Trulia chief economist Jed Kolko's article "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data"Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data). Click on graph for larger image.This graph shows the month-to-month change in the NSA Case-Shiller National index since 1987 (through November 2019). The seasonal pattern was smaller back in the '90s and early '00s, and increased once the bubble burst. The seasonal swings have declined since the bubble.The second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust. The swings in the seasonal factors have started to decrease, and I expect that over the next several years - as recent history is included in the factors - the seasonal factors will move back towards more normal levels. However, as Kolko noted, there will be a lag with the seasonal factor since it is based on several years of recent data.

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28 января, 18:41

Richmond Fed: Manufacturing Activity Rebounded in January

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From the Richmond Fed: Manufacturing Activity Rebounded in JanuaryFifth District manufacturing activity rebounded in January, according to the most recent survey from the Richmond Fed. The composite index rose from −5 in December to 20 in January, as all three components— shipments, new orders, and employment— increased. Local business conditions also improved as this index saw its largest increase since February 2013. Manufacturers were optimistic that conditions would continue to strengthen in the coming monthsSurvey results indicate that both employment and wages rose for survey participants in January. However, firms continued to struggle to find workers with the necessary skills. They expected this difficulty to persist but wages and employment to continue to grow in the next six months. emphasis addedThis was the last of the regional Fed surveys for January.Here is a graph comparing the regional Fed surveys and the ISM manufacturing index: Click on graph for larger image.The New York and Philly Fed surveys are averaged together (yellow, through January), and five Fed surveys are averaged (blue, through January) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through December (right axis).Based on these regional surveys, it seems likely the ISM manufacturing index will show expansion in January after five consecutive months of contraction.

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28 января, 17:06

Case-Shiller: National House Price Index increased 3.5% year-over-year in November

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S&P/Case-Shiller released the monthly Home Price Indices for November ("November" is a 3 month average of September, October and November prices).This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs. From S&P: S&P CoreLogic Case-Shiller Index Continues Upward Trend for Annual Home Price GainsThe S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.5% annual gain in November, up from 3.2% in the previous month. The 10-City Composite annual increase came in at 2.0%, up from 1.7% in the previous month. The 20-City Composite posted a 2.6% year-over-year gain, up from 2.2% in the previous month.Phoenix, Charlotte and Tampa reported the highest year-over-year gains among the 20 cities. In November, Phoenix led the way with a 5.9% year-over-year price increase, followed by Charlotte with a 5.2% increase and Tampa with a 5.0% increase. Fifteen of the 20 cities reported greater price increases in the year ending November 2019 versus the year ending October 2019....The National Index posted a month-over-month increase of 0.2%, while the 10-City and 20-City Composites both posted a month-over-month increase of 0.1% before seasonal adjustment in November. After seasonal adjustment, the National Index, 10-City and 20-City Composites all posted a 0.5% increase. In November, 13 of 20 cities reported increases before seasonal adjustment while all 20 cities reported increases after seasonal adjustment."The U.S. housing market was stable in November,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “With the month’s 3.5% increase in the national composite index, home prices are currently 59% above the trough reached in February 2012, and 15% above their pre-financial crisis peak. November’s results were broad-based, with gains in every city in our 20-city composite.“At a regional level, Phoenix retains the top spot for the sixth consecutive month, with a gain of 5.9% for November. Charlotte and Tampa rose by 5.2% and 5.0% respectively, leading the Southeast region. The Southeast has led all regions since January 2019.”“As was the case last month, after a long period of decelerating price increases, the National, 10-city, and 20-city Composites all rose at a modestly faster rate in November than they had done in October. This increase was broad-based, reflecting data in 15 of 20 cities. It is, of course, still too soon to say whether this marks an end to the deceleration or is merely a pause in the longer-term trend.”emphasis addedI'll have more later.

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28 января, 02:47

Tuesday: Case-Shiller House Prices

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Tuesday:• At 8:30 AM ET, Durable Goods Orders for December. The consensus is for a 0.5% increase in durable goods.• At 9:00 AM, S&P/Case-Shiller House Price Index for December. The consensus is for a 2.4% year-over-year increase in the Comp 20 index for December.• At 10:30 AM, Richmond Fed Survey of Manufacturing Activity for January. This is the last of regional manufacturing surveys for January.

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28 января, 00:34

Freddie Mac: Mortgage Serious Delinquency Rate increased slightly in December

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Freddie Mac reported that the Single-Family serious delinquency rate in December was 0.63%, up from 0.62% in November. Freddie's rate is down from 0.69% in December 2018.Freddie's serious delinquency rate peaked in February 2010 at 4.20%.These are mortgage loans that are "three monthly payments or more past due or in foreclosure".  Click on graph for larger imageI expect the delinquency rate to decline to a cycle bottom in the 0.4% to 0.6% range - so this is close to a bottom.Note: Fannie Mae will report for December soon.

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27 января, 23:12

New Home Prices

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As part of the new home sales report released today, the Census Bureau reported the number of homes sold by price and the average and median prices.From the Census Bureau: "The median sales price of new houses sold in December 2019 was $331,400. The average sales price was $384,500."The following graph shows the median and average new home prices. Click on graph for larger image.During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.Now it appears the home builders are offering some less expensive (and probably smaller) homes.The average price in December 2019 was $384,500, and the median price was $311,400.The second graph shows the percent of new homes sold by price.Very few new homes sold were under $150K in December 2019.  This is down from 30% in 2002.  In general, the under $150K bracket is going away.    The $400K+ bracket increased significantly since the housing recovery started, but has been holding steady recently.  Still, a majority of new homes (about 57%) in the U.S., are in the $200K to $400K range.

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27 января, 19:26

A few Comments on December New Home Sales

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New home sales for December were reported at 694,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised down.Annual sales in 2019 were at 681,000, up 10.3% from annual sales in 2018, and the best year for new home sales since 2007.   This was well above analysts forecast for sales in 2019, and the growth mostly happened in the second half of the year.Earlier: New Home Sales at 694,000 Annual Rate in December.Click on graph for larger image.This graph shows new home sales for 2018 and 2019 by month (Seasonally Adjusted Annual Rate).The year-over-year comparison was easy in December, and sales in December were up 23.0% year-over-year compared to December 2018.Note that the comparisons will be fairly easy for the first five months of 2020, but will be more difficult in the second half of the year.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. The "distressing gap" graph shows existing home sales (left axis) and new home sales (right axis) through December 2019. 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. Even though distressed sales are down significantly, following the bust, new home builders focused on more expensive homes - so the gap closed slowly.Now the gap is mostly closed, and I expect it to close a little more.   However, this assumes that the builders will offer some smaller, less expensive homes.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.