Saturday, 22 October 2016

Schedule for Week of Oct 23, 2016

The key economic reports this week are the advance estimate of Q3 GDP and September New Home Sales.

Also the Case-Shiller House Price Index for August will be released.

For manufacturing, the October Richmond and Kansas City Fed manufacturing surveys will be released this week.

----- Monday, Oct 24th -----

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

----- Tuesday, Oct 25th -----

9:00 AM: FHFA House Price Index for August 2016. This was originally a GSE only repeat sales, however there is also an expanded index.  The consensus is for a 0.5% month-to-month increase for this index.

Case-Shiller House Prices Indices9:00 AM ET: S&P/Case-Shiller House Price Index for August. Although this is the August report, it is really a 3 month average of June, July and August prices.

This graph shows the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the July 2016 report (the Composite 20 was started in January 2000).

The consensus is for a 5.1% year-over-year increase in the Comp 20 index for August. The Zillow forecast is for the National Index to increase 5.2% year-over-year in August.

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

----- Wednesday, Oct 26th -----

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

New Home Sales10:00 AM ET: New Home Sales for September from the Census Bureau.

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

The consensus is for an decrease in sales to 600 thousand Seasonally Adjusted Annual Rate (SAAR) in September from 609 thousand in August.

----- Thursday, Oct 27th -----

8:30 AM ET: The initial weekly unemployment claims report will be released.  The consensus is for 255 thousand initial claims, down from 260 thousand the previous week.  Note: I expect some further impact on claims due to Hurricane Matthew.

8:30 AM: Durable Goods Orders for September from the Census Bureau. The consensus is for a 0.2% increase in durable goods orders.

10:00 AM: Pending Home Sales Index for September. The consensus is for a 1.0% increase in the index.

10:00 AM: the Q3 Housing Vacancies and Homeownership from the Census Bureau.

11:00 AM: Kansas City Fed Survey of Manufacturing Activity for October.

----- Friday, Oct 28th -----

8:30 AM ET: Gross Domestic Product, 3rd quarter 2016 (Advance estimate). The consensus is that real GDP increased 2.5% annualized in Q3.

10:00 AM: University of Michigan's Consumer sentiment index (final for October). The consensus is for a reading of 88.5, up from the preliminary reading 87.9.

from Calculated Risk
via YQ Matrix

Thursday, 20 October 2016

A Few Comments on September Existing Home Sales

Earlier: Existing Home Sales increased in September to 5.47 million SAAR

Inventory remains a key issue. Here is a repeat of two paragraphs I wrote about inventory a few months ago:

I expected some increase in inventory last year, but that didn't happened.  Inventory is still very low and falling year-over-year (down 6.8% year-over-year in September). More inventory would probably mean smaller price increases and slightly higher sales, and less inventory means lower sales and somewhat larger price increases.

Two of the key reasons inventory is low: 1) A large number of single family home and condos were converted to rental units. Last year, housing economist Tom Lawler estimated there were 17.5 million renter occupied single family homes in the U.S., up from 10.7 million in 2000. Many of these houses were purchased by investors, and rents have increased substantially, and the investors are not selling (even though prices have increased too). Most of these rental conversions were at the lower end, and that is limiting the supply for first time buyers. 2) Baby boomers are aging in place (people tend to downsize when they are 75 or 80, in another 10 to 20 years for the boomers). Instead we are seeing a surge in home improvement spending, and this is also limiting supply.

Of course low inventory keeps potential move-up buyers from selling too.  If someone looks around for another home, and inventory is lean, they may decide to just stay and upgrade.

A key point: Some areas are seeing more inventory.   For example, there is more inventory in some coastal areas of California, in New York city and for high rise condos in Miami.

I'd consider any existing home sales rate in the 5 to 5.5 million range solid based on the normal historical turnover of the existing stock. As always, it is important to remember that new home sales are more important for jobs and the economy than existing home sales. Since existing sales are existing stock, the only direct contribution to GDP is the broker's commission. There is usually some additional spending with an existing home purchase - new furniture, etc - but overall the economic impact is small compared to a new home sale.

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

Existing Home Sales NSAClick on graph for larger image.

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

Note that sales NSA are in the slower Fall period, and will really slow seasonally in January and February.

from Calculated Risk
via YQ Matrix

Wednesday, 19 October 2016

Fed's Beige Book: "Most Districts indicated a modest or moderate pace of expansion"

Fed's Beige Book "Prepared at the Federal Reserve Bank of Dallas based on information collected on or before October 7, 2016. "
Reports from the twelve Federal Reserve Districts suggest national economic activity continued to expand during the reporting period from late August to early October. Most Districts indicated a modest or moderate pace of expansion; however, the New York District reported no change in overall activity. Compared with the previous report, the pace of growth improved in the St. Louis, Kansas City, and Dallas Districts. Outlooks were mostly positive, with growth expected to continue at a slight to moderate pace in several Districts.

Labor market conditions remained tight, with modest employment and wage growth noted over the reporting period. Most Districts characterized input costs and/or output prices as fairly flat, but prices increased slightly on net.
emphasis added
And on real estate:
Residential real estate activity expanded in most Districts since the prior report, and contacts in a few Districts expressed optimism about future growth. Homes sales fell markedly in the Kansas City District, while slight to moderate gains were reported by most of the other Districts. Demand for lower-priced homes was solid in Districts that commented on it, while sales of higher-priced homes slowed in the New York, Chicago, and Dallas Districts, and in Alaska according to San Francisco's report. Home inventories were generally reported to be low or declining and were restraining sales growth according to the Boston, Philadelphia, and Minneapolis Districts. Home prices continued to rise at a modest pace across much of the country, which contacts in some Districts attributed to tight inventories and labor constraints. Growth in residential construction was generally flat to up during the reporting period, with particular strength noted in the San Francisco District. However, construction activity dipped slightly in the Richmond District partly due to lot shortages.

Reports on multifamily activity varied but were positive on net. Strength in the apartment market was noted by the Dallas District (excluding the Houston metro area), while activity was mixed in the New York District. Growth in multifamily construction was positive in the Boston and Atlanta Districts but was mixed in the Richmond District and slowed further according to New York's report.

Commercial real estate leasing activity generally improved, and outlooks were mostly optimistic, although contacts in a few Districts expressed concern about economic uncertainty surrounding the upcoming presidential elections. Commercial rents were flat to up, and vacancy rates were generally low and/or declined in reporting Districts, except in the Houston metro area where office vacancies increased further. Sales of commercial properties were characterized as robust in the Chicago, Minneapolis, and San Francisco Districts but softened in the greater Boston area. Commercial construction increased on net, with contacts in the Cleveland and Atlanta Districts reporting increased or high backlogs. Shortages of skilled labor remained a constraint on construction activity in some Districts, such as Cleveland and San Francisco.
Real estate is decent.

from Calculated Risk
via YQ Matrix

Tuesday, 18 October 2016

FNC: Residential Property Values increased 5.7% year-over-year in August

In addition to Case-Shiller, and CoreLogic, I'm also watching the FNC, Zillow and several other house price indexes.

FNC released their August 2016 index data.  FNC reported that their Residential Price Index™ (RPI) indicates that U.S. residential property values increased 0.5% from July to August (Composite 100 index, not seasonally adjusted). 

The 10 city MSA increased 0.6% (NSA), the 20-MSA RPI increased 0.5%, and the 30-MSA RPI also increased 0.5% in August. These indexes are not seasonally adjusted (NSA), and are for non-distressed home sales (excluding foreclosure auction sales, REO sales, and short sales).

Notes: In addition to the composite indexes, FNC presents price indexes for 30 MSAs. FNC also provides seasonally adjusted data.

The index is still down 9.6% from the peak in 2006 (not inflation adjusted).

Click on graph for larger image.

This graph shows the year-over-year change based on the FNC index (four composites) through August 2016. The FNC indexes are hedonic price indexes using a blend of sold homes and real-time appraisals.

Most of the other indexes are also showing the year-over-year change in the mid single digit range.

Note: The August Case-Shiller index will be released on Tuesday, October 27th.

from Calculated Risk
via YQ Matrix

Key Measures Show Inflation close to 2% in September

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:
According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.2% (2.1% annualized rate) in September. The 16% trimmed-mean Consumer Price Index also rose 0.2% (2.1% annualized rate) during the month. The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics' (BLS) monthly CPI report.

Earlier today, the BLS reported that the seasonally adjusted CPI for all urban consumers rose 0.3% (3.6% annualized rate) in September. The CPI less food and energy rose 0.1% (1.4% annualized rate) on a seasonally adjusted basis.
Note: The Cleveland Fed has the median CPI details for September here. Motor fuel was up 94% annualized in September!

Inflation Measures Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. On a year-over-year basis, the median CPI rose 2.5%, the trimmed-mean CPI rose 2.1%, and the CPI less food and energy also rose 2.2%. Core PCE is for August and increased 1.6% year-over-year.

On a monthly basis, median CPI was at 2.1% annualized, trimmed-mean CPI was at 2.1% annualized, and core CPI was at 1.4% annualized.

Using these measures, inflation has generally been moving up, and most of these measures are at or above the Fed's target (Core PCE is still below).

from Calculated Risk
via YQ Matrix

CPI increased 0.3% in September

From the BLS:
The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 1.5 percent before seasonal adjustment.

Increases in the shelter and gasoline indexes were the main causes of the rise in the all items index. The gasoline index rose 5.8 percent in September and accounted for more than half of the all items increase. The shelter index increased 0.4 percent, its largest increase since May.

The energy index increased 2.9 percent, its largest advance since April. Along with the gasoline index, other energy component indexes also rose. The index for food, in contrast, was unchanged for the third consecutive month, as the food at home index continued to decline.

The index for all items less food and energy rose 0.1 percent in September after a 0.3-percent increase in August. ... The index for all items less food and energy rose 2.2 percent for the 12 months ending September.
emphasis added
I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI. This was at the consensus forecast of a 0.3% increase for CPI, and below the forecast of a 0.2% increase in core CPI.

from Calculated Risk
via YQ Matrix

Monday, 17 October 2016

Tuesday: CPI, Homebuilder Confidence

Along with CPI, the BLS will release CPI-W, the Cost-Of-Living Adjustment (COLA) for 2017, the contribution base, and the National Average Wage Index. I expect COLA to be slightly positive, and for a fairly significant increase in the contribution base.

• At 8:30 AM ET, the Consumer Price Index for September from the BLS. The consensus is for 0.3% increase in CPI, and a 0.2% increase in core CPI.

• At 10:00 AM, the October NAHB homebuilder survey. The consensus is for a reading of  63, down from 65 in September.  Any number above 50 indicates that more builders view sales conditions as good than poor.

from Calculated Risk
via YQ Matrix