FHFA Monthly Home Prices: January 2014

Today, the Federal Housing Finance Agency (FHFA) released the latest results of their monthly house price index (HPI) showing that in January, nationally, home prices increased 0.5% from December and rose 7.38% above the level seen in January 2013.

The FHFA monthly HPI are formulated from home purchase information collected from mortgages that have been sold to or guaranteed by Fannie Mae and Freddie Mac.

S&P/Case-Shiller: January 2014

Today's release of the S&P/Case-Shiller (CSI) home price indices for January reported that the non-seasonally adjusted Composite-10 price index went flat with prices rising just 0.01% from December while the Composite-20 index actually declined 0.08% over the same period.

The latest CSI data appears to be indicating that the typical seasonal deceleration in prices is underway with the extent of the slowing still to be decided with coming months data.

The 10-city composite index increased 13.54% as compared to January 2013 while the 20-city composite increased 13.24% over the same period.

Both of the broad composite indices still show significant peak declines slumping -20.42% for the 10-city national index and -19.86% for the 20-city national index on a peak comparison basis.

New Home Sales: February 2014

Today, the U.S. Census Department released its monthly New Residential Home Sales Report for February showing a notable decline with sales falling 3.3% from January dropping 1.1% below the level seen in February 2013 and remaining at an historically low level of 440K SAAR units.

The monthly supply increased to 5.2 months while the median selling price declined 1.24% and the average selling price increased 1.60% from the year ago level.

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

Existing Home Sales Report: February 2014

Today, the National Association of Realtors (NAR) released their Existing Home Sales Report for February showing weak sales with total home sales falling 0.4% since January dropping 7.1% below the level seen in February 2013.

Single family home sales also weakened dropping 0.2% from January falling a notable 6.9% below the level seen in February 2013 while the median selling price increased 9.0% above the level seen a year earlier.

Inventory of single family homes increased from January to 1.73 million units and climbed 4.8% above the level seen in February 2013 which, along with the sales pace, resulted in a monthly supply of 5.1 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

Reading Rates: MBA Application Survey – March 12 2014

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 5 basis point to 4.37% since last week while the purchase application volume declined 1% and the refinance application volume declined 3% over the same period.

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).

ADP National Employment Report: February 2014

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 February as private employers added 139,000 jobs in the month bringing the total employment level 1.90% above the level seen in February 2013.

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

Construction Spending: January 2014

Today, the U.S. Census Bureau released their latest read of construction spending showing mixed results for January with total private construction spending and single family construction spending rising since December while non-residential construction spending declined over the same period.

On a month-to-month basis, total residential spending increased 1.10% from December climbing 14.60% above the level seen in January 2013 and remaining well below the peak level seen in 2006.

Single family construction spending increased 2.30% from December rising 21.00% since January 2013 remaining well below it's peak level reached in 2006.

Non-residential construction spending declined 0.20% from December rising 9.70% below the level seen in December 2012 and remaining a well 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.

The Chicago Fed National Activity Index: January 2014

The latest release of the Chicago Federal Reserve National Activity Index (CFNAI) indicated that the national economic activity worsened in January with the index falling to a very weak level of -0.39 from a level of -0.03 in December while the three month moving average declined to a level of -0.10.

The CFNAI is a weighted average of 85 indicators of national economic activity collected into four overall categories of “production and income”, “employment, unemployment and income”, “personal consumption and housing” and “sales, orders and inventories”.

The Chicago Fed regards a value of zero for the total index as indicating that the national economy is expanding at its historical trend rate while a negative value indicates below average growth.

A value at or below -0.70 for the three month moving average of the national activity index (CFNAI-MA3) indicates that the national economy has either just entered or continues in recession.

Existing Home Sales Report: January 2014

On Friday, the National Association of Realtors (NAR) released their Existing Home Sales Report for January showing plunging sales with total home sales falling 5.1% since December and falling 5.1% below the level seen in January 2013.

Single family home sales also crashed dropping 5.8% from December falling a notable 6% below the level seen in January 2013 while the median selling price increased 10.4% above the level seen a year earlier.

Inventory of single family homes increased from December to 1.69 million units and climbed 7% above the level seen in January 2013 which, along with the sales pace, resulted in a monthly supply of 5.0 months.

The following charts (click for full-screen dynamic version) shows national existing single family home sales, median home prices, inventory and months of supply since 2005.

New Residential Construction Report: January 2014

Today’s New Residential Construction Report showed a notable declines to both total permit activity and total start activity with starts dropping a whopping 16% from December.

Single family housing permits, the most leading of indicators, declined 1.3% from December to 602K single family units (SAAR), and  increased 2.4% above the level seen in January 2013 but still remained well below levels seen at the peak in September 2005.

Homebuilder Blues: NAHB/Wells Fargo Home Builder Ratings February 2014

Yesterday, the National Association of Home Builders (NAHB) released their latest Housing Market Index (HMI) showing that assessments of housing activity worsened significantly in February with the composite HMI index falling to 46 while the "buyer traffic" index declined to a level of 31.

This pullback is severe and while many are suggesting that inclement weather is responsible, only time will tell if this is the beginning of an ongoing downtrend for new construction or just a momentary pause.

Looking at the data, it is fairly clear that the last year of results indicate a major change in builder sentiment likely coming as a result of improvements in confidence given the notable rise in buyer traffic, reduced inventory and a more balanced monthly supply.

Reading Rates: MBA Application Survey – February 19 2014

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 4 basis point to 4.37% since last week while the purchase application volume declined 6% and the refinance application volume declined 3% over the same period.

Now that the Federal Reserve has announced additional taper of their bond purchasing by another $10 billion per month ($20 billion taper), it will be interesting to watch the trend for mortgage rates.

Any significant move up in lending rates has the potential to do serious damage to home purchase activity and home prices.

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).

Production Pullback: Industrial Production January 2014

Today, the Federal Reserve released their monthly read of industrial production and capacity utilization showing a decrease in January with total industrial production falling 0.33% since December but rose 2.91% above the level seen in January 2013.

Capacity utilization also declined falling 0.52% from December but rising 1.02% above the level seen in January 2013 to stand at 78.48%

Conspicuous Correlation: Retail Sales January 2014

Today, the U.S. Census Bureau released its latest nominal read of retail sales for January showing a decrease of 0.4% from December, and a gain of 2.6% on a year-over-year basis on an aggregate of all items including food, fuel and healthcare services.

Nominal "discretionary" retail sales including home furnishings, home garden and building materials, consumer electronics and department store sales climbed slightly, rising 0.02% from December but declining 1.06% below the level seen in January 2013 while, adjusting for inflation, “real” discretionary retail sales declined 0.28% on the month and falling 2.77% since January 2013.

On a “nominal” basis, there had appeared to be “rough correlation” between strong home value appreciation and strong retail spending preceding the housing bust and an even stronger correlation when home values started to decline.

The following chart shows the year-over-year change to nominal discretionary retail sales and the year-over-year change to nominal the S&P/Case-Shiller Composite home price index since 1993 and since 2000.

As you can see there is, at the very least, a coincidental change to home values and consumer spending during the boom and then the bust, but as home values have continued to decline, retail spending has remained low but has not continued to consistently contract.

Looking at the chart below (click for full-screen dynamic version), adjusted for inflation (CPI for retail sales, CPI “less shelter” for S&P/Case-Shiller Composite) the “rough correlation” between the year-over-year change to the “discretionary” retail sales series and the year-over-year S&P/Case-Shiller Composite series seems now even more significant.

Reading Rates: MBA Application Survey – February 12 2014

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 1 basis point to 4.33% since last week while the purchase application volume declined 5% and the refinance application volume increased 0.2% over the same period.

Now that the Federal Reserve has announced additional taper of their bond purchasing by another $10 billion per month ($20 billion taper), it will be interesting to watch the trend for mortgage rates.

Any significant move up in lending rates has the potential to do serious damage to home purchase activity and home prices.

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).