Thursday, May 21, 2015

Existing Home Sales Slowed in April

Existing home sales declined 3.3% to a seasonally adjusted rate of 5.04 million, down from an upwardly revised 5.21 million in March. Existing home sales remain 6.1% higher than last year, despite last month’s decline.

The median existing-home prices increased 8.9% year over year to $219,400, the largest gain since January 2014.

Total housing inventory increased 10% to 2.21 million homes available for sale, 0.9% lower than a year ago. There is currently a 5.3 month supply of existing homes available for sale, up from 4.6 months in March.

National Association of Realtors President Chris Polychron, warned that markets could slow after August 1st, when lenders transition to new closing procedures required by the Consumer Financial Protection Bureau’s RESPA-TILA integrated disclosure rule. “We hope that the move away from the HUD—1 is smooth, but even if 10% of transactions experience closing issues, that’s as many as 40,000 transactions a month.”

Existing home sales increased 1.7% in the Midwest, but declined in the three other regions—falling by 3.1% in the Northeast, 1.7% in the West, and 6.8% in the South. Despite slowing sales over the month, each region saw year-over-year gains in home prices, especially in the Midwest and West regions which rose by 11.4% and 10.0% respectively.

All cash sales were 24% of transactions, while the share of first time homebuyers was 30%, both the same as in March.

Read the NAR report

Wednesday, May 20, 2015

FOMC Minutes: June Rate Hike Not Likely

Many participants said that a June rate hike is unlikely, according to the minutes from the April 28-29 Federal Open Market Committee (FOMC) meeting. However, a few participants anticipated that conditions for beginning policy firming will have been met by June. The Committee agreed that the timing of the first increase in the target range for the federal funds rate would be determined on a meeting-by-meeting basis, and that the increase in the target rate will be appropriate when they had seen further improvement in the labor market and were reasonably confident that inflation would move back to its 2% objective over the medium term.

Fed officials reported that during the intermeeting period, the pace of improvement in the labor market moderated somewhat and CPI continued to run below the FOMC’s longer-run objective of 2%, partly restrained by declines in energy prices and further decreases in non-energy import prices. The decline in private spending, combined with a decline in government spending, led to a substantial slowing in economic growth in the first quarter. Most participants agree that the weak quarter was driven by transitory factors, most notably the severe winter weather in some regions and the labor dispute at West Coast ports temporarily disrupting some supply chains. Overall, participants do not believe that the weakness in the first quarter will endure. High consumer sentiment, increased auto sales and a strong increase in household real incomes maintain the Committee’s expectations that the economy will continue to expand at a moderate pace, despite the slowdown in the first quarter.

However, a number of participants suggested that the negative effect of the strong dollar on net exports as well as the dampening effect of low oil prices on firms’ investment spending might be larger and longer-lasting than previously anticipated. Furthermore, the expected boost to household spending from lower energy prices had not materialized as expected.

Read the FOMC minutes.

Tuesday, May 19, 2015

Housing Starts Jump to Highest Level Since 2007

Housing starts in April rose to a seasonally adjusted annual rate of 1.135 million, 20.2% above the revised March estimate of 944,000 and 9.2% above the April 2014 rate of 1.039 million. Single-family housing starts grew at a rate of 733,000, 16.7% above the revised March figure of 628,000. The rate of growth for multifamily units was 389,000, 31.9% above the revised March estimate of 295,000.

The rate of housing starts accelerated in three of the four regions. Housing starts in the Northeast increased 85.9% to 184,000 total units, the largest of the four regions, followed by a 39.0% increase to 278,000 units in the West and a 27.8% increase to 170,000 units in the Midwest. The South, the only region to experience a deceleration in housing starts, decreased 1.8% to 503,000 units.

Building permits were at a seasonally adjusted annual rate of 1.143 units, which is 10.1% above the revised March rate of 1.038 and 6.4% above the year-ago estimate of 1.074. Building permits for single-family units were at a rate of 666,000, 3.7% above the March figure of 642,000. Building permits for multifamily units were 444,000, 20.0% above March’s revised rate of 370,000.

Housing completions in April were at a seasonally adjusted annual rate of 986,000, 20.4% above the revised March estimate of 819,000 and 19.4% above the year-ago rate of 826,000. Single-family housing completions were at a rate of 688,000, 14.5% above the revised March rate of 601,000. The April rate for multifamily units was 288,000, 39.8% higher than March.

Read the Census release.

Monday, May 18, 2015

Homebuilder Confidence Fell Two Points in May

The National Association of Home Builders/Wells Fargo Housing Market Index (HMI) fell two points to a level of 54 in May, but increased nine points from May 2014.

Two of the three components of the index experienced losses this month. The buyer traffic dropped one point to 39 and current sales conditions decreased two points to 59. The component charting sales expectations in the next six months rose one point to 64.

Two of the four regions posted gains in May. The South and the Midwest each increased one point to 57 and 55, respectively. The Northeast fell one point to 41 and the West fell three points to 55.

“Consumers are exhibiting caution, and want to be on more stable financial footing before purchasing a home,” said NAHB Chief Economist David Crowe. “On the bright side, the HMI component measuring future sales expectations has been tracking upward all year, mortgage rates remain low, and house prices are affordable. These factors should spur the release of pent-up demand moving forward.”

Read the NAHB release.

Friday, May 15, 2015

Mining and Utilities Drive Industrial Production Decline

Industrial production decreased 0.3% in April, the fifth consecutive monthly loss. From April 2014, the index increased 1.9%.

Output of utilities fell by 1.3%, an improvement from the 5.4% decline in March. Mining output decreased by 0.8% — the fourth consecutive monthly decrease — driven by a sharp fall in oil and gas well drilling. Manufacturing output was flat from March, as a small increase in the production of durables was offset by a small decrease in the output of nondurables .

The capacity utilization for the total industry was 78.2%, 1.9 percentage points below the 1972 - 2014 average.

Final products declined 0.5%, driven by declines in both consumer goods and business equipment. Nonindustrial supplies increased 0.2% as construction increased 0.1% and business supplies increased 0.3%. The index for materials declined 0.2% as a result of a 0.5% reduction in energy materials.

Read the Federal Reserve release.

Thursday, May 14, 2015

Student Loan Debt is Outpacing Other Debt Growth

The Federal Reserve Bank of New York announced in their Q1 2015 Household Debt and Credit Report, that total household debt reached $11.85 trillion, up only $24 billion from last quarter. Growth in balances slowed across most categories for the quarter, most notably in mortgage balances, which grew $1 billion, down $38 billion from the previous quarter.

“Tight standards on mortgage lending are reflected in both sluggish growth in housing debt as well as substandard reductions in mortgage delinquency and defaults,” said New York Fed SVP and economist Andrew Haughwout.

Credit card balances declined $16 billion after gaining $20 billion in Q4. Although the aggregate credit card limit increased by nearly one percent, new extensions of credit were slow as the number of credit inquiries dropped by 5 million from the previous quarter.

Delinquencies improved somewhat, as 5.7% of outstanding debt was in some sort of delinquency, compared to 6.0% in Q4. Mortgage delinquencies were 3.0%, 10 basis points lower than in Q4. About 112,000 individuals had foreclosure notation added to their credit reports, the lowest since the data was first collected in 1999.

Student loan debt drove the increase in total household debt adding $32 billion, a slight increase from last month. Although the 90+ day delinquency rate dropped 2 basis points, it remained high at 11.1% (and may actually be much higher since about half of these loans are in deferment). Given that there are $1.19 trillion in student loans outstanding, the economic consequences could be extraordinary

As Donghoon Lee, a research officer at the New York Fed noted in February, “Student loan delinquencies and repayment problems appear to be reducing borrowers’ ability to form their own households.” Approximately 8 million Americans are in default on their student loans according to the CFPB, with an additional 3 million Direct Loan borrowers at least 30 days past due. As the average amount of student loan debt and defaults continue to grow, an increasing share of borrowers may find it increasingly difficult to make large purchases.

Read the New York Fed report.

Producer Prices Slipped in April

Producer prices fell 0.4% in April, seasonally adjusted, according to the U.S. Bureau of Labor Statistics, after increasing 0.2% in March. Over 70% of the decrease in final demand prices is attributable to a decline in the index for final demand goods. On an unadjusted basis, producer prices are down 1.3% from the previous year.

After rising in March for the first time in eight months, final demand goods declined by 0.7% in April. Final demand energy contributed largely to the decline as prices for gasoline decreased 4.7%. Final demand for foods decreased 0.9%, while demand less foods and energy decreased by 0.1%.

Final demand services were sluggish as well, falling 0.1% after rising 0.1% in March. Final demand for trade services led the decrease as it fell 0.8%. More than 40% of the April decrease can be attributed to margins for machinery and equipment wholesaling, which declined by 1.0%. In contrast, prices for securities brokerage, dealing, investment advice and related services rose by 4.0%.

Read the BLS release