Monday, May 21, 2018

In March, 'release of deeds of trust' down 23 percent

A release of a deed of trust is an event that occurs when a deed of trust (often referred to as  a mortgage) is paid off, either through refinance, sale, or when all payments have been completed on a home loan. It is a "positive" economic indicator in sense that areas with improving economies tend to generally also report increases in releases of deeds of trust.

Other factors can be important as well. In cases where there is a housing shortage, but other economic indicators are robust, we might also see declining release activity. It's not always easy to know which factors are the key factors in whether or not releases are going up or down. 

Since early 2017, the general trend in release activity has been downward. In March 2018, releases totaled 21,304. That's up 11 percent from February 2018, when releases totaled 19,095. Overall, however, monthly data shows that monthly release totals have fallen repeatedly since December 2016's peak of 33,943:



Looking at annual totals, we find that 2017's total was down from 302,249, dropping to 297,151. That's still above 2015's total, however, and well above 2014's totals. 



The trend in year-over-year changes has also shown a decline. Over the past nine months, releases have been down every month, when compared to the same month a year earlier. In March 2018, releases were down 23 percent, compared to March of 2017 — when releases totaled 27,798. 



Another factor at work may be rising interest rates. Since re-finance activity is a factor in releases, and since re-fi's often slow as rates increase, we may be seeing slowing release activity as a result of significant increases in  mortgage rates over the past year. Mortgage rates are now the highest they've been since 2013:





For more on historical release activity in Colorado, see here. 


Saturday, May 19, 2018

Foreclosures in Colorado's Metro Counties Remain Near Multi-Year Lows


Foreclosure activity in Colorado metropolitan counties continues to be near multi-year lows. Over the past two years, foreclosure rates have been exceptionally low compared to the previous decade. 



March 2018 foreclosure filings were down 20 percent from March 2017, dropping from 540 to 432, year over year.

March 2018 foreclosure sales (completed foreclosures) were down compared to March 2017 with a decrease of 33.9 percent, dropping from 177 to 117, year over year.  

Filings rose 6.1 percent from February 2018 to March 2018, and auction sales were up 19.4 percent over the same period.

For the first three months of 2018 as a whole, foreclosure filings were down 11.8 percent, compared to the same period of last year. Filings fell from 1,429 for the first three months of 2017 to 1,260 during the same period of 2018. Foreclosure sales were also down during the same period: sales fell 24.9 percent from 450 to 338.

Pueblo County reported the highest foreclosure rate during March, while Boulder County reported the lowest rate. 

Comparing the first three months of this year to the first three months of last year, both filings and sales were down: 

Filings for Jan-Mar:

Sales for Jan-Mar: 

There's not a whole lot to say here except that foreclosure rates are low, and currently show no signs of heading back upward. So long as home prices continue to climb quickly upward, even those homeowners who have troubles with income can always just sell their homes in order to avoid foreclosure. 


Monday, May 14, 2018

Housing: High Prices, Few New Units

During the housing bubble that ended in 2007-8, the amount of new housing construction was remarkable. Enormous subdivisions were being constructed in metro areas across the land. Buildings of condominiums sprang up in city centers, and the ready availability of credit meant many were buying more than one house as "investments" or summer homes. New housing, it seemed, was everywhere. 
At the same time, home prices were increasing, driven up in part by fact that everyone was convinced that housing prices always go up, and real estate — any real estate — was a rock solid investment. 
When the bubble popped, there was suddenly a housing glut. From Las Vegas to Florida, we heard about buildings of condos that were more than half empty, and about suburban housing developments that became ghost towns. 
On the most superficial level, the current boom might remind some of the pre-2008 bubble. Housing prices are climbing fast, and in many areas, there are bidding wars for houses that are quite ordinary. 
This time, though, things are different. This time, there isn't nearly as much housing being built was during the last bubble. There may be a bubble in prices this time, but there does not appear to be a bubble in construction. 
A look at housing starts in recent years shows that in raw numbers, starts are still not even close to getting back to where they were during the last boom: 

Now, some might think "it's good we not going back to bubble levels." True enough. But when we take into account growth in new households, we see that current construction trends are even weaker than the graph above suggests, and are below even more commonly-seen non-bubble levels of construction. 
As both the Wall Street Journal and USA Today noticed last month, the amount of new housing construction taking place right now, as a proportion of existing households, is at historic lows. USA Today reports:
Since the real estate market crash took the wind out of the construction boom of the 2000s, fewer homes are being built per U.S. household than at nearly any time in history.
And the Wall Street Journal concludes:
Home construction per household a decade after the bust remains near the lowest level in 60 years of record-keeping...What makes the slump puzzling is that by most other measures, the American economy is booming. Jobs are plentiful, wages are on the rise and the stock market is near record highs. Millennials, the largest generation since the baby boomers, are aging into home ownership.
When we look at new housing construction compared to total households going back to 1959, we find that 2009 and 2010 were years with the smallest amount of new construction in decadesUnknown Object:

Only the early 90s are comparable to what happened in the wake of the 2008 financial crisis. 
Moreover, since 2010, new construction has rebounded remarkably little. 
Last year, the Kansas City Fed produced a similar analysis, and the results were pretty much the same: new housing construction, taking household growth into account, now remains near a multi-decade low. 
But why has this happened? The Fed Report considers a number of options, including:
One reason is that builders in many metropolitan areas are facing a shortage of qualified construction workers. In addition, smaller builders, which account for the majority of single-family development in some mid-sized metropolitan areas, are having trouble financing land purchases and construction....A third explanation is the limited availability of undeveloped land in desired locations. 
Some of these factors were due to accidents of history. Many of the Mexican immigrants who worked in construction in the US in the decade following the 1994 Mexican financial crisis now are less interested in working in the US thanks to improvements in the Mexican economy. Since 2009, net migration from Mexico has fallen below zero. Some of those leaving took their homebuilding skills with them. 
Meanwhile, finding inexpensive financing for land acquisition and construction has been difficult as money has been siphoned off to other forms of bubble investment as central-bank produced asset inflation continues. 
While real estate is certainly affected by expansive monetary policy, bubbles inflate in unpredictable ways. During the last bubble, investors grew enamored with housing, and money flowed accordingly. But nowadays, as Brendan Brown has often noted, other investment "narratives" have directed many investors' attention elsewhere. It's no longer assumed that housing prices will always go up. Meanwhile, lumber costs, labor costs, and regulatory costs at the local level continue to push up production costs. Since the advent of Dodd-Frank, small banks have been more often squeezed out by a handful of huge banks. As small banks disappear, so does access to financing for many smaller builders in smaller markets. 
Taking all of these things together, the supply of housing is not recovering to more historically normal levels. 
This doesn't mean demand for housing has gone away, of course. Population growth has not contracted like housing construction has. Vacancy rates are down and housing prices in both rental housing and in single-family housing continues to head upward.
And this lackluster production is all happening during a period of expansion. Presumably, it should be easy to find financing to build housing right now, and to find buyers who can pay a price that will cover expenses for homebuilders. That doesn't seem to be happening. 

Thursday, May 10, 2018

Unemployment Rates in Colorado Near What They Were During the Late-90s Boom

According to the  most recent monthly data from the Bureau of Labor Statistics, the unemployment rate in Colorado in March 2018 fell to 2.9 percent, down from 3.3 percent in February. March's rate was up slightly from March 2017's rate of 2.8 percent.

This continues a nine-year trend, beginning in 2010, in which unemployment rates in general have been falling in Colorado, and in its metro areas.

It also continues a trend in which Colorado's unemployment rate has been lower than the national rate.  Since May of 2013, Colorado has had a lower unemployment rate than the US overall in every month. In March 2018, the nationwide unemployment rate was 4.1 percent.



Through Colorado Metro areas, similar trends of declining unemployment have existed in recent years. Although rates have inched up slightly since mid-2017, unemployment rates nevertheless remain quite low.

In March, Colorado's metro areas had the following unemployment rates:

US 4.1
Colorado 2.9
Ft Collins 2.5
Denver-Aur 2.8
Greeley 2.7
GJ 4.0
Colo Spr 3.4
Pueblo 4.4
Boulder 2.5

Graphed monthly, the metros compare like this:



To add a bit more clarity, though, I've graphed the rates at 3-year intervals for each  metro area, for March of each year: 



We find that Boulder tends to consistently have the lowest unemployment rate in the state. Grand Junction and Pueblo, on the other hand, tend to have the highest rates. Overall, though, rates statewide are near where they were in 2000 before the dot-com bust, and during the very large economic expansion of the late 1990s and early 2000s in Colorado. 

There are signs that the economy in Colorado is cooling down, but at this time, there are not signs of large changes in current employment trends. 

Monday, April 23, 2018

According to the Fed's Other Inflation Measure, Inflation's at an 11-year High

According to the Federal Reserve's Underlying Inflation Gauge, the 12-month inflation growth in March was at 3.13 percent. That's the highest rate recorded in 140 months, or nearly 12 years. The last time the UIG measure was as high was in July 2006, when it was at 3.2 percent.



The Fed began publicly reporting on new measure in December of last year, and takes into account a broader measure of inflation than the more-often used CPI measure.

Not shockingly, the UIG has shown a higher rate of inflation than the CPI, most of the time in recent years. Moreover, this gap between UIG and CPI appears to be growing.The gap is simply calculated by substracting the CPI YOY growth rate from UIG YOY growth rate. A negative value means the CPI was higher than the UIG in that period. 



In March, while the UIG was 3.13 percent, the CPI growth rate was 2.4 percent. This was a 13-month high for the CPI.

The use of consumer prices only in the CPI has long been a problem, in that the cost of living and planning for the future does not involve only the basket of goods used in the CPI calculations. A wide variety of assets affect the American economy as well.
As explained by the New York Fed's summary of the UIG measure:
We use data from the following two broad categories: (1) consumer, producer, and import prices for goods and services and (2) nonprice variables such as labor market measures, money aggregates, producer surveys, and financial variables (short- and long-term government interest rates, corporate and high-yield bonds, consumer credit volumes and real estate loans, stocks, and commodity prices).
But don't expect the Fed to abandon its fondness for the CPI and the "2-percent inflation" goal any time soon. Today, the president of the Federal Reserve Bank of Chicago, Charles Evans, reiterated that the Fed is holding to its 2-percent inflation goal - and they're not talking about using the UIG measure.

Monday, February 12, 2018

Areas Where Colorado's Economy Has Diversified

La Voz last month outlined some of the ways Colorado's economy has diversified in recent decades. Noting that the the state's historical dependence on natural resource extraction has made the local economy prone to booms and busts, La Voz looks at a few areas where the state has moved away from having a limited economy:

Outdoor Recreation
Tourism
Cannabis
Renewable Energy

To be sure, the first three on the list are connected to tourism overall, although there's nothing wrong with people traveling to Colorado — especially if the reasons are far more diverse than just "skiing."

La Voz sums it up:

Colorado’s dependence on the extraction industries for its economic well-being has put long-time residents through a historical roller coaster ride of boom and bust cycles. Those days may finally be behind the state with low unemployment rates, some of the fastest growing companies in the country and a diversified set of industries drawn to the state. Now the state’s largest employers are from the Aviation, Healthcare, Telecommunications and Financial Services industries. The new mix of companies has provided sustained growth and an economic engine that keeps Colorado near the top of the class.

New Mexico Never Really Recovered from the Great Recession

The Santa Fe New Mexican recently posted an informative article on the New Mexico economy, which has never really gotten back to where it was before the Great Recession of 2008-2009 — at least not in terms of employment. 
When it comes to New Mexico’s economy, 2006 seems like a lifetime ago.
Job growth that year was its fastest in more than a decade. The unemployment rate dropped to 3.6 percent. The price of oil was at record levels. State government was awash with cash. 
 
Then, with stunning speed, came the Great Recession in December 2007, and New Mexico still hasn’t recovered.  In a state where the economy is based in large part on government dollars, it’s government numbers that paint the picture.  The state’s jobless rate was 6 percent in December 2017, according to preliminary estimates. Alaska is the only state doing worse.

The nation’s rate was 4.1 percent, a 17-year low.  Of New Mexico’s 33 counties, all but tiny Mora County have higher unemployment rates than they did before the recession.  The state hasn’t yet gotten back the more than 50,000 jobs it lost during the recession, making New Mexico one of only a few states that have yet to recover their jobs. 

Read the full article. 

Saturday, November 25, 2017

Foreclosure Sales Hit All-Time Low in September

Foreclosure sales in Colorado's metropolitan counties fell to a total of 95 in September, coming in at the lowest total ever recorded since this survey was begun in 2007. During the same period, there were 415 foreclosure filings.

This continues a multi-year trend of declining foreclosure activity, as we can see in the graph. September's foreclosure sales total was the lowest ever recorded with the next smallest being June's total of 106.

Foreclosure filings, meanwhile, we up slightly from all-time high's but remained near the lowest levels we've seen in the last decade. An all-time low was reached in July of this year when foreclosure filings totals dropped to 394.

These figures are totals for Colorado's 11 most-populous counties, plus Broomfield County. Foreclosure filings are the event that begins the foreclosure process, and foreclosure sales occur at the end of the process when properties are sold at auction, often going to the lender.


In the second graph, we see year-over-year changes in total foreclosure filings and sales. In September 2017, filings were down slightly from September 2016, dropping by 5.25 percent. Foreclosure sales dropped by much more, falling 38.8 percent year over year. As we can see in the graph, both filings and sales have been dropping each month for the past 10 months, and the overall trend for both filings and sales has clearly been downward since 2012.


Many counties differ in their foreclosure trends, and the number of foreclosure compared to the overall number of households can vary considerably.

If we look at foreclosure filings in each county on a per household basis, we find that Pueblo County has the fewest households per foreclosure — only 394 households per foreclosure — while Larimer County has the most — 2,771 households per foreclosure. Note that a larger number means fewer foreclosures in relation to population size. In other words, the larger the number of households per foreclosure, the lower the "foreclosure rate."

Also note that the counties with the lowest foreclosure rate tend to be higher-income counties such as Boulder and Douglas counties. Pueblo, Mesa, and Adams counties, on the other hand — which have higher foreclosure rates — have lower overall income levels.


A similar trend holds when we make the same comparisons using foreclosure sales. Pueblo has the fewest households per foreclosure sale (2,723) while Broomfield County reported no foreclosure sales at all.


Some counties are certainly more foreclosure-free than others. But, even those counties that have some of the highest foreclosure rates, relatively speaking, are still way down in their foreclosure totals from what we were seeing back in 2009 and 2010. Foreclosure activity continues to be at very low levels across all metro areas for now.

(This data is collected from the Public Trustee in each county.)

Friday, November 17, 2017

Colorado Homicide Rate Up in 2016

According to the FBI's annual crime report, released in September, Colorado's homicide rate increased to 3.7 per 100,000 in 2016. That's up from 2015's rate of 3.2 per 100,000, and from the 50-year low of 2.6 recorded in 2010.

2016's rate was a 12-year high, but still remained well below the homicide rates that were common during the 1970s and 1980s:


Compared to the nationwide homicide rate, the Colorado rate has been lower every year since 1963. The nationwide homicide rate in 2016 was 5.2 per 100,000.

Since the 1990s, the US homicide rate has been nearly cut in half, and the US rate hit a 52-year low in 2014 when it fell to 4.4 per 100,000.

Compared to other US states and Canadian provinces, Colorado's homicide rate places it as one of the lowest-homicide rates in in the US, and puts it on a par with central-Canadian provinces like Alberta and Manitoba:



As a map: 


Within the state of Colorado, metro areas can differ significantly. Over the past decade, the metro area with the highest homicide rate has in most years been Pueblo (no Pueblo data is available for 2008). In 2016, Colorado metro areas reported the following homicide rates, per 100,000:

Pueblo: 6.7
Grand Junction: 6
Colorado Springs: 4.5
Denver: 4.3
Fort Collins: 2.6
Greeley: 1.4

By this measure, Fort Collins and Greeley are among the safest places in the world. Grand Junction's homicide rate spiked in 2016, but with such a small overall population, it's impossible to say if this change reflects any real trend in the region. 

These numbers, however, are by full metro areas. If we look within a single metro area, such as the Denver Metro Area, we'll find significant differences there as well. For example, the City and County of Denver is the primary driver of homicide rates in the area. In 2016, there were 57 homicides in the City and County of Denver, and 22 in the City of Aurora. In the metro area as a whole, however, there were 124 homicides total. Thus, Denver and Aurora alone accounted for nearly two-thirds (63 percent) of all homicides in the metro area. This is in spite of the fact that those two cities make up only 37 percent of the total population of the metro area. 

Thursday, November 16, 2017

Case-Shiller: Denver home prices growth falls to 35-month low

According to the latest Case-Shiller report, home prices have been moderating throughout the year, with August's report showing a 7.2 increase over August of 2016. This was the smallest rate of increase found in 35 months, or since October of 2014.

August's growth rate is down from the November 2015 peak of 10.9 percent.


Meanwhile, home price growth in the 20-city index has been largely flat, but slightly growing over the past year — although overall growth is below that found in Denver metro. In august, the 20-city index grow rate was 5.9 percent, which is a six-month high.

While overall growth is outpacing the 20-city sample, we can also see that Denver's index value is now well above where it was during the last peak home-price period of 2006.

The  index for metro Denver had peaked at 140 back in August 2006. But now, the index value is 201, up 43 percent from 2006.

The 20-city index, meanwhile, is not even back to its former peak, and is now still down 1.7 percent from where it peaked during August of 2006.


Clearly, home price growth in Denver metro is strong, even when compared to a variety of other large cities throughout the US. This is partly fueled by job growth in general, and specifically by job growth in the energy sector.

Moderation in price growth, however, also reflects a similar moderation in job growth that metro Denver is now experiencing.

Tuesday, November 14, 2017

Releases of deeds of trust in metros fall to 32-month low

A deed of trust is "released" when a home loan is paid off. This event is recorded by the public trustee in each county in Colorado.

Trends in public trustees tell us about how much activity there is in terms of home loan refinances and home sales. In many ways, activity in releases of deeds of trust are an indicator of demand for real estate purchases in Colorado, and historically, we have seen more release activity during times of economic boom. 

Activity Through September of This Yea

In September 2017, we found that releases had fallen to a 32-month low in the 11 largest counties in Colorado, plus Broomfield County. These counties include more than 90 percent of the population of Colorado. 

In September, releases totaled 20,730. That's the lowest total since February 2015 when releases totaled 18,826. September 2017's total up down from the same month a year earlier, falling 26.6 percent from September 2016's total of 28,252.



Looking at counties, individually, we find that year-over-year, the counties with the largest drops were Douglas, Broomfield, and Denver counties. There were no counties that reported increases during this period. 




Although September's total is clearly down significantly from December 2016's peak, overall activity continues to be generally robust as demand for housing and homes for purchase remains strong. Although the Federal reserve acted to allow the Federal Funds rate to rise slightly over the past two years, mortgage rates spikes in late  2016, but fell throughout much of 2017. Without a sustained increase in mortgage rates, we're likely to continue to see relatively strong numbers for releases of deeds of trust. At least, this will be the case until there is a general worsening of the labor market and economy overall.  

So, for now, release activity is moderating, but compared to most years since 2008, activity is relatively strong. This reflects ongoing interest in real estate purchases and in refi activity in Colorado. 


Friday, November 10, 2017

Suicides drop in Summit County — Is Altitude a Factor in Suicide Rates?

Summit Daily reports that suicides in the mountain county are on the decline this year after a spike upward last year:


Four people have died of suicide this year in Summit County, a sobering statistic but still a welcome improvement from the double-digit numbers that have marked past years. If the trend continues, 2017 could have the lowest number of suicide deaths in a decade.The major reduction comes on the heels of a concerted push by advocacy groups and local officials to combat mental illness and break down barriers to care. And while it's difficult to draw a causal link with such a small sample size, the numbers indicate Summit is moving in the right direction. 
"I would say one suicide is too many, but any reduction in the number feels like a win," assistant Summit County manager and former Summit Community Care Clinic CEO Sarah Vaine said. 
There were 13 suicide deaths in 2016, the highest number on record, eight in 2015 and 10 in 2014. The most recent year with fewer than four deaths was 2007, according to coroner's office statistics.
This is good news to be sure, although when dealing with such a small population, huge swings can occur in events like suicides, without it indicating any sort of established trend. It may be that last year was the anomaly, and that there was never any growing trend of suicides to begin with. We'll need more time to know. 

Given that Summit County is a high-altitude county, this discussion is an interesting reminder that high altitude has been connected to suicides in at least one study. Writing in the journal High Altitude Medicine and Biology in 2011, Barry Brenner, David Cheng, Sunday Clark, and Carlos A. Camargo, Jr. concluded there really is a correlation: 
Recent preliminary studies have reported a positive correlation between mean altitude and the suicide rate of the 48 contiguous U.S.states. Because intrastate altitude may have large variation, we examined all 2584 U.S. counties to evaluate whether an independent relationship between altitude and suicide exists. We hypothesized that counties at higher elevation would have higher suicide rates. This retrospective study examines 20 yr of county-specific mortality data from 1979 to 1998... 
Controlling for percent of age >50 yr, percent male, percent white, median household income, and population density of each county, the higher-altitude counties had significantly higher suicide rates than the lower-altitude counties. Similar findings were observed for both firearm-related suicides (59% of suicides) and nonfirearm-related suicides. We conclude that altitude may be a novel risk factor for suicide in the contiguous United States.
In recent numbers for the state of Colorado overall (February 2017), Denver showed up with the lowest suicide rate among counties at 13.9, while mountain counties had some of the highest rates, including Gilpin (37.8), Clear Creek (37.8), Park (37.8) and Teller (37.8) counties. Among large counties, Pueblo county had the highest rate at 28.5. (All rates are total suicides per 100,000 people.)

Unfortunately, since these are such small counties, population-wise, the statewide report notes  "there is no significant statistical difference between the rate for this region and all other regions with the exception of Denver County."
Even if there is a clear correlation here, the implications for public policy are few, except that local healthcare workers ought to be aware of risk factors. The possible correlation here is interesting, nonetheless, and possibly of use when other alleged causes of suicide are put forward.