HOUSING
An index of builder confidence in the market for new single-family homes fell by two points to a seasonally adjusted level of 55 in February from January’s reading of 57, the National Association of Home Builders said Tuesday. A reading over 50 means a majority of builders see conditions as generally positive.
The trade group attributed this month’s downturn to unusually high snow levels across the country.
The current-sales component of the NAHB index dipped one point to 61. The index measuring expectations for sales over the next six months held steady at 60. A gauge of traffic from prospective buyers decreased five points to 39.
On a regional basis, the three-month moving averages for the index improved the most this month in the West, but slipped in the Northeast, Midwest and South. (Charts from Haver Analytics)
One of the latest reports to indicate a strong start to the spring season is the monthly survey of home builders conducted by housing research firm Zelman Associates. Respondents in Zelman’s January survey reported that total orders for new homes increased by 32% in January from a year earlier, an improvement from the 27% year-over-year pace in December.
Zelman described January’s seasonally adjusted order pace as “the highest level of the recovery.” In addition, 45% of Zelman’s respondents reported better than expected customer-traffic counts in January, the highest percentage since Zelman began posing that question monthly in January 2014. The Zelman survey covers builders representing 13% of U.S. new-home production. (…)
Meanwhile, yet another survey released recently also showed January gains. Wells Fargo Securities’ monthly survey of 150 home-builder sales managers found that 39% reported better-than-expected orders in January, up from 29% in December and from 37% in January 2014. (…)
Housing research firm Metrostudy, part of Hanley Wood LLC, noted gains in order tallies in January in warm-weather markets such as Southern California and Las Vegas and others like Denver. Brad Hunter, Metrostudy’s chief economist, said it’s possible that sales suffered last month, as they likely are this month, in the Northeast and other regions hit with significant snow. But he added that the improving economy should lift the national results. (…)
Go figure!
Boston Has Third-Snowiest Season in Just 24 Days, More Forecast
Housing Turning Point Seen in U.S. First-Time BuyersAs a deep freeze grips parts of America in a typically slow season for housing, first-time buyers are flocking to Redfin Corp.’s property tours and classes, signaling their renewed interest in the market.
“We are really hitting records in early-stage demand, in terms of people going on tours or even writing offers,” said Nela Richardson, the chief economist at Seattle-based Redfin, which has real estate offices in 26 states. “People are like, ok, this is the time to buy.”
They “are stepping a toe in the water in 2015,” said Richardson. (…)
First-time buyers have less competition from institutional investors, whose purchases dropped to a four-year low in the third quarter of last year, making up 4.3 percent of all residential sales, down from 5.3 percent a year earlier, according to data from RealtyTrac.
The share of first-time homebuyers last year dropped to its lowest level in three decades, according to an annual survey released in November by the National Association of Realtors. It fell to 33 percent from 38 percent a year earlier.
Redfin’s boost in tour and class attendance is a sign of renewed interest in the market from these Americans. Redfin, with offices in all regions of the U.S., said its home-buying class registrations for first-time borrowers jumped 31 percent in the first few weeks of January compared with the prior year. The number of customers requesting home tours increased 45 percent from last year. (…)
Mortgage applications decreased 13.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending February 13, 2015. …
The Refinance Index decreased 16 percent from the previous week. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier.
Americans Add Debt, but Fissures Appear
Household debt—including mortgages, credit cards, auto loans and student loans—rose $117 billion from October to December to $11.8 trillion, according to figures from the Federal Reserve Bank of New York released Tuesday.
But more Americans fell behind on auto and student loans. The share of auto-loan debt 90 or more days overdue jumped to 3.5% last quarter, from 3.1%. A similar rate for student loans rose to 11.3% from 11.1%.
In a good sign, America’s increased borrowing has been broad-based: Mortgage balances—the bulk of U.S. household debt—edged up $39 billion to $8.2 trillion. New mortgage loans, including refinanced mortgages, totaled $355 billion last quarter, up $18 billion from the previous quarter—a sign that, slowly, Americans are borrowing to buy homes again.
Auto-loan balances grew $21 billion to $955 billion, and credit-card balances increased $20 billion to $700 billion. Student-loan debt—the fastest-growing category—rose $31 billion to $1.2 trillion.
(…) unlike auto loans, seriously late payments on credit cards are at their lowest levels in years, even though credit-card borrowings have risen substantially. (…)
Meanwhile, student-loan debt balances rose $77 billion just last year. Nearly $30 billion in student loans were newly delinquent last quarter, up from $27 billion in the second quarter. (…)
The Good News on Capex It’s not all bad news for capital expenditures this year.
Excluding energy and financials, capital expenditure budgets are anticipated to expand almost 5% this year, according to Citi. That’s based on data collected from nearly 670 non-financial U.S. publicly-traded companies that Citi’s U.S. equity research team follows.
Sectors expected to increase capital spending include consumer discretionary, tech, industrials and consumer staples. The consumer discretionary companies Citi surveyed are pointing to spending growth of 10% across the sector. The same budgets are anticipated to rise by 9% for tech firms, almost 7% for industrials and 6% for consumer staples.
The bank is particularly upbeat on the tech sector where capital expenditures are showing signs of sustained growth into 2016 after rising about 15% last year.
From Bespoke Investment:
Euro plummets to seven-year low as Greece blinks in debt negotiations Athens will submit a request for a loan extension breaking temporary deadlock in negotiations with Europe’s creditors
Pressure Builds to Weaken Yuan Investors see more pain ahead for the Chinese yuan, as pressure mounts for Beijing to address slowing growth by devaluing its currency.
The central bank sets a daily reference rate for the yuan’s value against the dollar, then allows it to trade within 2% of that fixing. Lately, traders have pushed the yuan to the weak end of its official range. In recent weeks, the offshore yuan has been pushed outside this limit.
(…) Many investors also believe China will need to nudge the yuan lower as a global race among central banks to reduce the value of their currencies intensifies. (…)
Falling Oil Prices Spur Indonesia’s Rate Cut Indonesia’s surprise rate cut late yesterday shows just how far oil’s fall this year has changed the equation for central banks, even one saddled with typically high inflation.
Indonesia’s central bank unexpectedly cut its policy rate 25 basis points to 7.5% on Tuesday. The bank also cut its deposit facility rate (that is, the rate it pays commercial banks to hold cash) by a quarter percentage point to 5.5%.
Is This A Game-Changer For Oil Prices?
(…) News out of Libya shows that the security situation is rapidly worsening. Islamic militants attacked a key pipeline, detonating explosives that cut off production from the El Sarir field, the country’s largest oil field by production. The pipeline moves oil to the Hariga port, and from there it is exported. For now, it is unclear if exports will be interrupted due to the backlog of oil sitting in storage at the port. (…)
The North African OPEC member is now producing less than 200,000 barrels per day, closing in on its lowest level of output in years. (…)
The situation is deteriorating rather quickly, with Libya looking increasingly like a failed state. Libya’s Prime Minister, who runs a semi-exiled government in eastern Libya after being ousted by militants from Tripoli last year, called on western countries to intervene on Libya’s behalf to root out extremists. Similarly, Egypt called on the U.S.-led coalition fighting the Islamic State in Iraq and Syria to add Libyan militants to their list of targets. Libya’s National Oil Corporation said that it would consider shutting down all oil fields in all locations in order to protect the lives of its workers if security cannot be assured. (…)
After months and months of bearish oil reports, the chaos in Libya is one of the first major geopolitical flashpoints that have affected global oil supplies. OPEC’s Secretary-General said on January 26 that the excess oil production was in the neighborhood of about 1.5 million barrels per day. With Libyan oil production now down below 200,000 barrels per day – a major reduction from the nearly 1 million barrels per day of output last October – excess global supplies just shrank by a nontrivial amount. If Libya’s output does not recover, this could force a rebound in global oil prices quicker than many market analysts had anticipated.
Meanwhile, the rig count in the United States continues to fall at a very rapid clip. Baker Hughes revealed another week of vanishing rigs, with an eye-popping 98 rigs being pulled from the oil patch for the week ending on February 13. Rig counts have now plummeted by 30% since October. (…)
EARNINGS WATCH
As of last night, 404 companies (87.1% of the S&P 500’s market cap) have reported. So far, EPS ex-Energy are seen up 9.5%. Total S&P 500 EPS are seen up 6.4% excluding the likelihood of continued beats. So far, they are beating by 4.5%. Revenues ex-energy are seen up 4.3%. (RBC)