Reading Rates: MBA Application Survey – September 11 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) increased 7 basis points to 4.68% since last week while the purchase application volume declined 3% and the refinance application volume declined 20% over the same period.

Rates appear to be continuing to rise after some settling and following weeks of explosive increases that saw a rise of over 100 basis points seemingly directly correlated with the Feds recent suggestion that they may start to "taper" the GSE and treasury purchases later this year.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

Beveridge Curve Balancing Act: July 2013

Looking deeper at today’s Job Openings and Labor Turnover report you can see that the rate of job hires continues to outpace the rate of job separations while job openings steadily improve resulting ( ... measured indirectly) in the gradual declining of the overall unemployment rate.

The latest data indicates that private job hires are occurring at a rate of 3.6% of total employment while private job separations occurs at a rate of 3.4%.

It's important to note that today's data is very preliminary and volatile and that a more sustained and sustained spread between the rate of hires and separations would be required to make a significant dent in our current structurally weak job market.

Economic Jolt: Job Openings and Labor Turnover July 2013

Today, the Bureau of Labor Statistics released their latest monthly read of job availability and labor turnover (JOLT) showing that private non-farm job “openings” declined 5.06% since June but remained 2.27% above the level seen in July 2012 while private non-farm job “hires” rose 2.40% from June remaining 3.61% above the level seen in July 2012.

Job “layoffs and discharges” declined 5.19% from June falling 3.85% below the level seen last year while quitting activity increased 3.64% from June remaining 5.16% above the level seen in July 2012.

It’s important to understand that job “quits” are included as a component of the “separations” data series as “quitting” is a valid means of workers “separating” from employers but their inclusion tends to create an overall procyclical trend in what would otherwise be logically thought of as a countercyclical process (i.e. downturn leads to increase in separations not decrease).

Outstanding Contraction!: Commercial Paper Outstanding August 2013

The Commercial Paper (CP) market is essentially a private debt market used by corporations as a generally cheaper means of funding typical recurring operations than drawing on a line of bank credit.

Commercial paper, as financial instrument, is by no means a recent innovation and, in fact, you can read about how the CP market was affected by the many historic financial shocks experienced by the U.S. (read Panic on Wall Street: A History of America’s Financial Disasters)

Although the Federal Reserve was able to artificially bring CP rates down significantly since the shocking 615 basis point spread blowout (A2/P2 spread) of late 2008, they have not been successful in preventing an overall contraction in the CP market.

The Federal Reserve calculates and published the total amount of CP outstanding every week and as of late August commercial paper continues to slump on a monthly basis while still rising 1.59% on a year-over-year basis to $1004.10 billion, a level that is still substantially lower than even the worst periods of the last two recessions.

SNAP Food Stamp Participation: June 2013

As a logical consequence of the prolonged economic downturn, participation in the federal food stamp program is continuing to rise.

The latest data released by the Department of Agriculture indicated that in June, 125,059 individual recipients were added to the food stamps program with the current total increasing 2.34% on a year-over-year basis.

Individuals receiving food stamp benefits increased to 47.76 million which, as a ratio of the overall civilian non-institutional population now stands at a whopping 19.45% of the population.

Households receiving food stamps benefits increased by 45,908 to 23.11 million households with the current total rising 3.01% above the level seen a year earlier

As participation continues to swell, so too has the total nominal benefit cost climbing 2.30% on a year-over-year basis to $6.34 billion for the month.

ADP National Employment Report: August 2013

Today, private staffing and business services firm ADP released the latest installment of their National Employment Report indicating that the situation for private employment in the U.S. improved in August as private employers added 176,000 jobs in the month bringing the total employment level 1.87% above the level seen in August 2012.

Look for Friday’s BLS Employment Situation Report to likely show somewhat similar trends.

Extended Unemployment: Initial, Continued and Extended Unemployment Claims September 05 2013

Today’s jobless claims report showed declined to both initial and continued unemployment claims as initial claims trended well below the closely watched 400K level.

Seasonally adjusted “initial” unemployment claims dropped by 9,000 to 323,000 claims from 332,000 claims for the prior week while seasonally adjusted “continued” claims declined by 43,000 claims to 2.951 million resulting in an “insured” unemployment rate of 2.3%.

Since the middle of 2008 though, two federal government sponsored “extended” unemployment benefit programs (the “extended benefits” and “EUC 2008” from recent legislation) have been picking up claimants that have fallen off of the traditional unemployment benefits rolls.

Currently there are some 1.49 million people receiving federal “extended” unemployment benefits.

Taken together with the latest 2.82 million people that are currently counted as receiving traditional continued unemployment benefits, there are 4.32 million people on state and federal unemployment rolls.

Reading Rates: MBA Application Survey – September 04 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) declined 5 basis points to 4.60% since last week while the purchase application volume declined 0.4% and the refinance application volume increased 2% over the same period.

Rates appear to be continuing to rise after some settling and following weeks of explosive increases that saw a rise of over 100 basis points seemingly directly correlated with the Feds recent suggestion that they may start to "taper" the GSE and treasury purchases later this year.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

ISM Manufacturing Report on Business: August 2013

Today, the Institute for Supply Management released their latest Report on Business for the manufacturing sector indicating that manufacturing activity improved in August.

At 55.7 the purchasing manager’s composite index (PMI) rose 0.54% since July and climbed 9.86% above the level seen a year earlier giving an indication of improving conditions for manufacturing.

Respondent assessments still appear to be hopeful though overall assessments appear to indicate emerging weakness:

"Slight improvements in both domestic and international sales." (Fabricated Metal Products)

"Business is slowing down, not sure why — but we may end up below last year's sales levels, whereas we had forecast 6.5 percent growth." (Miscellaneous Manufacturing)

"Material prices continue to be favorable; business is steady." (Paper Products)

"Slowing down slightly, but still stronger than last year by 20 percent." (Furniture & Related Products)

"Military slowdown affecting business." (Computer & Electronic Products)

"Summer seasonal businesses are doing well after a late start." (Printing & Related Support Activities)

"Still not seeing the year we had expected. Cautious about the balance of 2013." (Machinery)

"Tight government spending still affecting business." (Transportation Equipment)

"With improved weather outlook in the central states, agricultural prices are relaxing year over year." (Food, Beverage & Tobacco Products)

"We have benefitted from the Yen; seeing a 20 percent decrease in material costs from 2012 to 2013." (Chemical Products)

Construction Spending: July 2013

Today, the U.S. Census Bureau released their latest read of construction spending showing increase in June with total private construction spending rising 0.92% from June while single family private residential construction spending and non-residential construction spending also increased on the month.

On a month-to-month basis, total residential spending increased 0.58% from June climbing 19.00% above the level seen in July 2012 while still remaining a whopping 50.54% below the peak level seen in 2006.

Single family construction spending increased 0.50% since June rising 31.74% since July 2012 but remained a whopping 64.25% below it's peak in 2006.

Non-residential construction spending increased 1.31% since June falling 0.29% below the level seen in July 2012 and remained a whopping 30.37% below the peak level reached in October 2008.

The following charts (click for larger dynamic versions) show private residential construction spending, private residential single family construction spending and private non-residential construction spending broken out and plotted since 1993 along with the year-over-year, month-to-month and peak percent change to each since 1994 and 2000 – 2005.

Pending Home Sales: July 2013

Today, the National Association of Realtors (NAR) released their Pending Home Sales Report for July showing that pending home sales declined with the seasonally adjusted national index falling 1.3% from June but increasing 6.7% above the level seen in July 2012.

Meanwhile, the NARs chief economist Lawrence Yun is suggests that the recent pullback in contract activity does not constitute a general trend while in the Northeast and West, higher rates and prices are having an impact on sales:

"The modest decline in sales is not yet concerning, and contract activity remains elevated, with the South and Midwest showing no measurable slowdown.  However, higher mortgage interest rates and rising home prices are impacting monthly contract activity in the high-cost regions of the Northeast and the West ... More homes clearly need to be built in the West to relieve price pressure, or the region could soon face pronounced affordability problems."

The following chart shows the seasonally adjusted national pending home sales index along with the percent change on a year-over-year basis as well as the percent change from the peak set in 2005 (click for larger version).

Reading Rates: MBA Application Survey – August 28 2013

The Mortgage Bankers Association (MBA) publishes the results of a weekly applications survey that covers roughly 50 percent of all residential mortgage originations and tracks the average interest rate for 30 year and 15 year fixed rate mortgages as well as the volume of both purchase and refinance applications.

The purchase application index has been highlighted as a particularly important data series as it very broadly captures the demand side of residential real estate for both new and existing home purchases.

The latest data is showing that the average rate for a 30 year fixed rate mortgage (from FHA and conforming GSE data) increased a notable 12 basis point to 4.66% since last week while the purchase application volume increased 2% and the refinance application volume declined 5% over the same period.

Rates continuing to rise after some settling and following weeks of explosive increases that saw a rise of over 100 basis points seemingly directly correlated with the Feds recent suggestion that they may start to "taper" the GSE and treasury purchases later this year.

The following chart shows the average interest rate for 30 year and 15 year fixed rate mortgages since 2006 as well as the purchase, refinance and composite loan volumes (click for larger dynamic full-screen version).

S&P/Case-Shiller: June 2013

Today's release of the S&P/Case-Shiller (CSI) home price indices for June reported that the non-seasonally adjusted Composite-10 price index rose a notable 2.20% since May while the Composite-20 index also increased 2.15% over the same period.

The latest CSI data is continuing to demonstrate significant resiliency compared to past years, as prices remained stable through the typically slow winter and early spring period and now appear to be rising notably through the more active late spring period.

The 10-city composite index increased 11.89% as compared to June 2012 while the 20-city composite increased 12.07% over the same period.

Both of the broad composite indices still show significant peak declines slumping -23.39% for the 10-city national index and -22.75% for the 20-city national index on a peak comparison basis.

To better visualize today’s results use Blytic.com to view the full release.

Radar Watching: May 2013

As I have noted in the past, since the home price index data provided by Radar Logic is more timely, unadjusted and un-smoothed it is particularly useful for gaining deeper visibility over our housing markets.

As for the latest trends, it’s important to note that the 25-MSA Composite is continuing to show significant year-over-year increases rising 9.5% above the level seen in May 2012 with prices, more or less, bucking the typical seasonal trends and staying elevated throughout the winter months and on into spring.

This year we see a very small price drop moving into November possibly indicating that the remainder of the price declines until March could also be relativity small.

New Home Sales: July 2013

Last week, the U.S. Census Department released its monthly New Residential Home Sales Report for July showing a notable pullback with sales falling a whopping 13.41% from June and rising just 6.78% above the level seen in July 2012 remaining at an historically low level of 394K SAAR units.

It's important to recognize that the inventory of new homes appears to be mounting as unsold units totaled 171K, still though near the lowest level seen in in at least 47 years while the median number of months for sale declined to 3.5.

The monthly supply increased to 5.2 months while the median selling price increased 8.34% and the average selling price increased 14.31% from the year ago level.

The following chart show the extent of sales decline to date (click for full-larger version).