Existing home sales down, inventories up, prices down, Chicago Fed index

As previously discussed, with mtg purchase apps down 10% from last year, and the % of cash buyers down as well, it’s hard to see how total sales can be anything but lower?

Existing Home Sales


Highlights
In the latest disappointment out of the housing sector, existing home sales fell back 1.8 percent in August to a lower-than-expected annual rate of 5.05 million vs the Econoday consensus for 5.18 million. Year-on-year, sales are down 5.3 percent, a bit more steep than minus 4.5 percent in the prior month.

Limited supply has been a major factor holding down sales with supply on the market falling 40,000 homes in the month to 2.31 million. Supply relative to sales, at 5.5 months, held unchanged reflecting August’s sales dip.

Prices have been flat the last six months, down 0.8 percent in August to a median $219,800. Year-on-year, the median is little changed at plus 4.8 percent.

Looking at regional sales data, August’s weakness was centered in the West, down 6.0 percent, followed by the largest housing region which is the South, down 4.2 percent. The Northeast, which is the smallest region, shows a 4.7 percent gain with the Midwest up 2.5 percent.

Calculated Risk

The NAR reports:Existing-Home Sales Slightly Lose Momentum in August as Investor Activity Declines

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, decreased 1.8 percent to a seasonally adjusted annual rate of 5.05 million in August from a slight downwardly-revised 5.14 million in July. Sales are at the second-highest pace of 2014, but remain 5.3 percent below the 5.33 million-unit level from last August, which was also the second-highest sales level of 2013. …

Total housing inventory at the end of August declined 1.7 percent to 2.31 million existing homes available for sale, which represents a 5.5-month supply at the current sales pace. However, unsold inventory is 4.5 percent higher than a year ago, when there were 2.21 million existing homes available for sale.


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The Chicago Fed index was reported down a lot, and last month revised lower as well, but you pretty much only hear about this one when it goes up…


Highlights
A drop in production pulled down the national activity index in August, which came in at minus 0.21 from a revised plus 0.26 in July. The 3-month average is at plus 0.07 vs July’s revised plus 0.20.

The big negative in August was the 0.4 percent decline in the manufacturing component of the industrial production report, one that was likely skewed lower by timing issues for auto retooling. Consumption & housing also pulled down the main index, at minus 0.12 from July’s minus 0.13.

The employment component fell to zero from July’s plus 0.10 reflecting weak nonfarm payroll growth of 142,000. The component that had the best showing in August was sales/orders/inventories, at plus 0.08 vs plus 0.04 in July.


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The first L shaped US ‘recovery’

Some 5 years ago when the talk was about whether the US recovery was going to be V shaped or U shaped, I suggested that it would be more L shaped, as a 0 rate policy requires a larger deficit, etc. That is, after a sharp fall it would go sideways.

Here are a few illustrative charts:

Adjusting this next one for population growth makes the point even more:

The growth rate of personal consumption has leveled off at over half of prior cycles:

And looks like deep down ‘those demon banks’ haven’t fared all that well either:

Japan’s ‘bad inflation’

The Next Stage of Abenomics Is Coming – Shinzo Abe

(WSJ) My highest priority as Japan’s prime minister remains the economy… Make no mistake, Japan will emerge from economic contraction and advance into new fields and engage in fresh challenges…Some have said that Japan’s structural reforms—what I call the “third arrow” of Abenomics, alongside the first two “arrows” of monetary and fiscal policy—are at a standstill and that wage increases aren’t keeping up with price increases. But there is no reason for alarm. We remain on the path toward a revitalized Japan we began in December 2012…My cabinet and I will do all we can to implement our growth strategy and economic reforms and press forward with the second stage of Abenomics.

Japan PM say he aims to see pension-fund reform as soon as possible

(Reuters) Japanese Prime Minister Shinzo Abe said on Friday he aims to reform the country’s $1.2 trillion public fund as soon as possible. “I believe GPIF reforms are extremely important …. I would like to review its portfolio as soon as possible,” Abe told business leaders in a speech. Abe also said he aimed to decide on whether to proceed with a plan to raise the sales tax to 10 percent from eight percent by the end of the year, after carefully examining economic conditions. “We just cannot miss the chance of beating deflation. We need to watch carefully how the economy has recovered in July, August and September (before making the decision),” Abe said.

Housing starts

As previously suggested, with fewer cash sales and mtg purchase apps down 10% vs last year seems doubtful sales do much.

With population growth what it is, ‘normal’ for this point in the cycle would be about double what we are seeing. In fact, we are now back to only what were the lows of prior cycles, and we have a lot more people now:



Highlights
Homebuilders are being cautious as both starts and permits disappointed for August. But August is coming off a strong July.

Housing starts for August fell 14.4 percent, following a boost of 22.9 percent the month before. August’s pace of 0.956 million units was short of market expectations for 1.038 million units and was up 8.0 percent on a year-ago basis.

The multifamily component declined a monthly 31.7 after jumping 44.9 percent in July. The single-family component edged down 2.4 percent, following an 11.1 percent surge in July.

Building permits are oscillating, too. Permits decreased 5.6 percent in August, following an 8.6 percent boost in July. Monthly swings have largely been in the multifamily component. The single-family component has been in a modest downturn in recent months.

There has been a lot of volatility in housing data in recent months and the latest starts data likely will lead to some trimming of forecasts for third quarter GDP growth. The trend continues that housing strength is in the multifamily component.


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mortgage purchase apps

A welcome increase for the week, but still running a full 10% lower than last year.

And cash purchases are also falling, which means sales can’t be rising, etc.



“Despite adjustments for the Labor Day holiday the previous week, mortgage applications surged last week, even amid rising rates.

Total application volume rose 7.9 percent week-to-week, according to the Mortgage Bankers Association (MBA), driven mostly by refinances, which doesn’t jibe with the rise in rates.

Applications to refinance rose 10 percent from the previous week, but are still down 22.5 percent on year. Mortgage applications to purchase a home rose 5 percent from the previous week but are down 10 percent on year.”


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Fed preview

The Fed’s mandates are full employment, price stability, and low long term rates. And along with who knows what, he has to be seeing these charts:

New jobs down for the winter, up some, then back down for several months:

Not forget purchase mortgage applications are down 12% vs last year, and now cash purchases are down as well, as housing contributes less than half of what’s it’s contributed in prior cycles.

And the rest of the world economy is decelerating as well.