2Q U.S. Productivity Revised Up, Compensation Surged

The latest Short-Term Energy Outlook from the U.S. Energy Information Administration is available here.

The total number of mortgage applications recovered 1.8% last week, according to the Mortgage Bankers Association, after a 0.9% decline at the end of August. The gain lifted the opening September level 1.5% versus the August average which rose 2.9% from July.

A 3.7% w/w increase in purchase applications followed several weeks of decline and lifted applications 1.7% above the August average which fell 3.5% from July.

During the last ten years there has been a 58% correlation between the y/y change in purchase applications and the change in new plus existing single family home sales.

Applications to refinance slipped 0.9%.

The effective interest rate on a conventional 30-year mortgage fell to 6.53% from 6.60% the prior week. The peak for 30 year financing was 7.08% late in June. The rate on 15-year financing also fell to 6.25% and the peak rate was 6.75%. Interest rates on 15 and 30 year mortgages are closely correlated (>90%) with the rate on 10 year Treasury securities.

During the last ten years there has been a (negative) 79% correlation between the level of applications for purchase and the effective interest rate on a 30-year mortgage.

The Mortgage Bankers Association surveys between 20 to 35 of the top lenders in the U.S. housing industry to derive its refinance, purchase and market indexes. The weekly survey accounts for more than 40% of all applications processed each week by mortgage lenders. Visit the Mortgage Bankers Association site here.

There's a nip of autumn in the air in the New York region, and that change in the weather begins to shift our attention from the price of gasoline to heating fuel costs. Haver has three new databases that help us assess "how much it costs to produce heat" and many other energy questions. Coming from Energy Intelligence, a leading oil industry consulting firm, Oil Market Intelligence (OMI), Natural Gas Week (NGW) and World Gas Intelligence (WGI) contain extensive price, supply, demand and stock data for several energy sources in the US and around the world.

For instance, we can compare the cost of various fuels on a common basis, since NGW and WGI contain prices expressed in both the unit each fuel is commonly sold in, as well as in millions of Btu of energy produced. Last week, WTI Cushing crude was priced at $70.54/barrel and $12.16 per million Btu, and heating oil at the New York harbor was $1.9312/gallon and $13.92/MMBtu. By contrast, coal from Big Sandy River, Ohio, was $46.50 a ton, which translates into $1.94/MMBtu.

These databases also facilitate comparisons across geographic markets. So in the winter of 2000/2001, we can quickly see how distorted the natural gas market was in California. As evident from the second graph, the New York "City Gate" price was about $4.50/MMBtu in late summer and peaked over the New Year in a range of $10-$16. It has shown seasonal spikes during the winter in most other years. However, in California, there looks to be only the mildest of seasonal swings then, as one might surmise from the temperate climate there. Except in 2001. In August 2000, the price was $5 to $6. In December it was $26, reaching a peak of $37.12 in the third week of December and remaining above $10/MMBtu until early May. A casual observer [in truth, someone just now passing by my desk] remarked, "my, what was wrong in LA that winter!" Lots. Similarly, it's easy to see the impact of Hurricanes Katrina and Rita in 2005.

The frequencies of these data vary, with some daily, some weekly and some monthly. Coverage of Europe is quite detailed, and supply and demand information on Asia is extensive. These databases, well established in the industry, should be very useful to Haver clients.