Wells Fargo Reports:U.S. Home Prices Continue to Hit New Highs

National home prices rose 0.4 percent in February and are up 5.8 percent year over year, according to the S&P CoreLogic Case-Shiller Index. Prices continue to be fueled by a steady uptrend in sales and low inventory.

National Home Prices Edge Up

  • · Supported by tight supply and steady gains in home sales, U.S. home prices continue to edge higher. The S&P CoreLogic Case- Shiller National Home Price Index is up 5.8 percent over the past 12 months and the 20-City and 10-City indices are up 5.9 percent and 5.2 percent, respectively.
  • · Among the 20 cities, Seattle continues to lead price gains, reporting a 12.2 percent increase over the year.

Solid Seller’s Market

  • Sentiment reports indicate that consumers feel increasingly confident that it is a “good time to sell.” Survey measures have been corroborated by recent hard data as the NAR reports properties are selling at a faster rate. Existing homes were on the market for an average of just 34 days in March, down from 45 days in February and 50 days in January. Low inventories and rising demand are likely to continue to fuel price pressures.

Wells Fargo Reports: Texas Labor Market Update: March 2017

Texas added 9,500 jobs in March and February now shows a larger 14,100-job gain. Labor force growth outpaced job growth, however, causing the jobless rate to edge 0.1 percentage points higher to 5.0 percent.

Seasonal Quirks Hide a More Positive Story

Although a 9,500-job monthly gain may seem small by Texas standards, job gains disappointed at the national level in March as well. The better household data provided some consolation in the U.S. report, but less so in Texas, where the jobless rate rose 0.1 percentage points to 5.0 percent as labor force growth outpaced employment growth.

Texas posted the third largest job gain among all states. Revisions to February were significant, bringing Texas’ three-month average job gain to 25,000. The details of the March data also tell a better story than the headline. Most major sectors added jobs. The largest gain was in professional & business services, which added 13,200 jobs, with large gains in both professional & tech services and administrative support positions. Financial services also had a strong month, adding 2,800 jobs in March. Even with solid hiring in government, information and education, service sector employment declined by 1,000 jobs in March. Gains were offset by a 12,300-job decline in the leisure & hospitality sector, which may have been impacted by seasonal factors. This year’s relatively late Easter pushed Spring Break out into mid-April, resulting in less seasonal hiring than usual in March. There was a large decline in health employment on the month, although the sector remains one of the strongest growing over the year. Cuts in March were likely a one-month blip.

In a reversal of sorts, goods producing sector employment was up broadly in March. Mining & logging added 4,800 jobs, reflecting the ramp up in drilling activity in the Permian Basin. The rig count has steadily climbed higher since bottoming out last May. Construction employment rose by 4,000 jobs in March—also likely reflecting the improvement in the energy patch as well as continued gains in homebuilding and commercial construction. Manufacturers added 1,700 jobs in March and February’s gain was revised up to +6,400 jobs. March marks the first month that Texas’ manufacturing employment was above its year-ago level in nearly two years.

The bottom chart illustrates some of the impact of the energy boom and 105 subsequent bust. Houston’s employment remains essentially flat with its 100 December 2014 level, which is a testament to efforts to diversify its economy beyond fossil fuels. It appears to have paid off. The energy bust did take a bit out of Houston’s momentum, however. We expect the region to return to growth mode rather quickly now that oil prices have stabilized and drilling activity is ramping back up. Manufacturing faces a longer road to recovery, as headcounts are still 5.1 percent lower than peak in December 2014, though the upward trend is encouraging. Mining & logging employment in Texas has returned to where it was back in 2012, right at the beginning of the shale boom. With oil prices seemingly stuck at around $50 a barrel, oil producers are becoming even more efficient, which means employment will likely come back slower than production does.

Source: U.S. Department of Labor and Wells Fargo Securities

Wells Fargo Reports: Existing home sales increased 4.4 percent in March to a 5.71-million unit pace—a new cycle high.

 Existing home sales increased 4.4 percent in March to a 5.71-million unit pace—a new cycle high. Inventories remain tight and have helped to push prices up 7 percent over the past year, pressuring affordability

Sales Recover in March with a Little Seasonal Help Existing home sales came in even stronger than our above-consensus call in March. Sales of previously owned homes rose 4.4 percent in March to a 5.71 million unit annual pace—a new cycle high. Sales of both single-family and condos/co-ops rose over the month, but single-family sales have demonstrated a clearer uptrend in recent months and are up 6.1 percent over the past year.

We expected sales to rebound in March following February’s strong reading on pending home sales. Pending home sales, which typically lead existing home sales by one to two months, rebounded 5.5 percent in February. That more than reversed the previous month’s drop. While pending home sales tend to exaggerate monthly moves in existing home sales, the recent jump suggests sales are nearly back in line with the trend registered last fall before mortgage rates moved noticeably higher.

A relatively warm January and February, however, likely helped to propel pending home sales early in the year and suggest some risk to sales early in the second quarter. The Northeast saw the largest increase in existing sales in March (up 10.1 percent), but a late season snowstorm will likely have weighed on closings for April. Sales in the Midwest snapped three months of declines and jumped 9.2 percent in March. Meanwhile, the South, which accounts for more than 40 percent of sales, saw March sales rise 3.4 percent, building on a strong run that began last fall.

Tight Inventories Leading to Affordability Challenges

Heading into the key spring buying season, inventories remain exceptionally lean. As is typical for March, inventories rose last month, but are down 6.6 percent over the past year. The stronger pace of sales last month kept the supply of existing homes at 3.8 months, well below the 5.5 month supply considered a balanced market. The average number of days a home spent on the market fell to 34 in March from 45 days in February and 47 days a year earlier.

The low level of inventories continues to put upward pressure on prices and dent affordability. The median price of an existing home is up 6.8 percent from last March, with the South and West seeing prices rise north of 8 percent. Combined with higher mortgage rates, affordability has fallen nearly 9 percent over the past year, and has kept the share of first time buyers stuck around 32 percent. Historically, first-time buyers have accounted for about 40 percent of sales. The share of households that believe now is a good time to sell a home reached a fresh cycle high in the preliminary April University of Michigan Consumer Sentiment Survey whereas the share believing now is a good time to buy has been trending lower over the past two years.

Source: National Association of Realtors and Wells Fargo Securities

Tom Ewing’s Environmental Update

* EPA’s request for comments on regulatory reform – “on regulations that may be appropriate for repeal, replacement, or modification” – has been hijacked by the legions of apparatchiks who cannot abide any prospect that their familiar little enclaves, so desperately spun and fearfully held together, are really just … Whoa… Too much for Monday morning…?  At any rate, so far this docket has 2,149 public comments. Here’s a common, and frequently complete, sentiment: “Please maintain ALL EXISTING REGULATIONS, even if redundant.” Now that’s a helpful reply to EPA’s request for comments to “be as specific as possible, include any supporting data…and provide specific suggestions regarding repeal, replacement or modification.” And who knew there were so many peeps in the US named Anonymous Anonymous? Fearless!

* DOE’s State Energy Advisory Board (STEAB) holds its next meeting in May. STEAB reports to the Office of Energy Efficiency and Renewable Energy. The agenda includes Task Force updates and objectives for FY 2017. There will also be discussions on energy efficiency and renewable energy projects and initiatives, and updates on member activities within the states. The Board publishes an annual report, to be presented to the Secretary and Congress. The latest such report on the website is dated 2012. Uh…somebody hasn’t been doing her job… and I guess neither the Secretary nor anyone in Congress has missed the Report for the last five years. But at least they held a lot of meetings!

* Oregon is one state keeping a focus on energy and climate issues. Beaver State lawmakers and agencies are as busy as well, you know what, regarding efforts to limit CO2 and generate non-fossil electricity to extend Portland’s light-rail lines (double-tracked, of course) from the Gresham station, up-and-down Mt. Hood and all through the Malheur National Forest. One new House bill, for example, would require the State Department of Energy to develop a “climate test” to conduct reviews for proposed “fossil fuel infrastructure projects.” The Portland suburb of Milwaukie supports; its Resolution advises that “the future of the fossil fuel industry is questionable.” But there is also legislative push-back. Another bill would require gas station receipts to include the cost per gallon of low carbon fuel standards. Of course there’s push-back to the push-back: the American Lung Association in OR writes that pollution and climate change impacts cost Oregonians $18.42 per fill up.

Small Machines. Big Impact: Share Your Dream Project to Win a New John Deere G-Series Skid Steer or Compact Track Loader

Small Machines. Big Impact: Share Your Dream Project to Win a New John Deere G-Series Skid Steer or Compact Track Loader