by Bill McBride on 7/25/2014 01:59:00 PM
Friday, July 25, 2014
The automakers will report July vehicle sales next Friday, August 1st. Sales in June were at 16.92 million on a seasonally adjusted annual rate basis (SAAR), and it appears sales in July will be above 16 million SAAR again. The analyst consensus is for July sales of 16.8 million SAAR.
Note: There were 26 selling days in July this year compared to 25 last year.
Here are a few forecasts:
From J.D. Power: U.S. auto sales seen rising 9 percent in July: JD Power-LMC
U.S. auto sales in July will be the strongest for the month since 2006, and rise 9 percent from last year, automotive industry consultants J.D. Power and LMC Automotive predicted on Thursday.From TrueCar: New Vehicle Sales Continue to Sizzle in July; TrueCar Increases 2014 Annual Sales Forecast to 16.35M
For the fifth consecutive month, the seasonally adjusted annualized sales rate will top 16 million new vehicles, at 16.6 million, the consultancies said.
LMC raised its full-year 2014 forecast for new auto sales to 16.3 million, from 16.2 million.
Seasonally Adjusted Annualized Rate ("SAAR") of 16.7 million new vehicle sales is up 6.8 percent from July 2013.From Kelley Blue Book: New-Car Sales to Jump 11.6 Percent Year-Over-Year in July
The seasonally adjusted annual rate (SAAR) for July 2014 is estimated to be 16.6 million, up from 15.7 million in July 2013 and down from 16.9 million in June 2014.Another solid month for auto sales.
by Bill McBride on 7/25/2014 11:10:00 AM
From HotelNewsNow.com: STR: US hotel results for week ending 19 July
In year-over-year measurements, the industry’s occupancy rate rose 2.9 percent to 77.1 percent. Average daily rate increased 4.1 percent to finish the week at US$117.57. Revenue per available room for the week was up 7.1 percent to finish at US$90.68.Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.
This is the highest occupancy rate for any week since at least January 2000. The previous high was 77.0% in late July 2000.
And from HotelNewNow.com: June US hotel occupancy best of this century
Just how good is the current state of demand? Take a bite of this juicy nugget: June occupancy of 71.7% is the highest of any June this century.The following graph shows the seasonal pattern for the hotel occupancy rate for the last 15 years using the four week average.
The above factoid was culled by Jan Freitag, senior VP of global development for STR and our resident hotel data aficionado. Jan’s also a master of context, explaining this milestone another way: The average occupancy for U.S. hotels is now higher than the previous peak recorded in June 2007 (71.1%).
To understand how we got here, you need look no further than economics 101. For much of the past few years, the relationship between supply and demand has been, well, just great.
As of June, demand growth (12-month moving average) was up 3.2%, according to STR data. Supply growth? Only 0.8%.
In other words, supply growth still has had no impact, as Freitag points out.
June ADR (12-month moving average) was $112, up 3.9%. The result is revenue per available room of $71, which represents growth of 6.4%.
Both those ADR and RevPAR numbers represent all-time highs for the U.S. hotel industry.
Click on graph for larger image.
The red line is for 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels. Purple is for 2000.
The 4-week average of the occupancy rate is solidly above the median for 2000-2007, and is at the same level as in 2000.
Right now it looks like 2014 will be the best year since 2000 for hotels. A very strong year ...
Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com
by Bill McBride on 7/25/2014 09:38:00 AM
Here is a new indicator that I'm following that appears to be a leading indicator for industrial production.
From the American Chemistry Council: U.S. Economic Expansion Being Tempered By Uncertainty in Energy Markets, Shows Leading Economic Indicator
The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC) posted a 0.4 percent increase over June, as measured on a three-month moving average (3MMA). The pace of growth was consistent with earlier growth logged in the second quarter. Year over year growth now stands at a 4.4 percent increase. ...Click on graph for larger image.
During July production-related indicators were up, as were product/selling prices, and inventories. After rebounding sharply in May, chemical equity prices have weakened in response to the growing unrest in the Middle East and Ukraine.
Unlike earlier readings, trends in construction-related chemistries suggest a lackluster market for this sector, which includes plastic resins as well as adhesives and sealants, construction chemicals, paint additives, and other performance chemistries. Pigments are faring better, as are plastic resins used in consumer product applications. Continued strength in electronic chemicals is encouraging, as the semiconductor industry’s early place in the supply chain makes it a bellwether of the industrial cycle. Gains in oilfield chemicals suggest that the boom in unconventional oil and gas will continue to progress, contributing to the overall growth of the U.S. economy.
This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer compared to Industrial Production. It does appear that CAB (red) generally leads Industrial Production (blue).
And this suggests continued growth.
Thursday, July 24, 2014
Lawler: Various Builder Results: Horton Home Orders, Market Share Jumps on Increased Sales Incentives; Orders “Lackluster” at Other Builders
by Bill McBride on 7/24/2014 09:25:00 PM
CR Note: The comments on D.R. Horton are very interesting (more incentives, no price increases). Also see table at bottom for summary stats.
From housing economist Tom Lawler:
D.R. Horton reported that net home orders in the quarter ended June 30, 2014 totaled 8,551, up 25.3% from the comparable quarter of 2013. Sales per community were up almost 13% YOY. Horton’s acquisition of Crown Communities added 290 to last quarter’s orders. DHI’s average net order price last quarter was $281,336, up 5.0% from a year ago. Home deliveries last quarter totaled 7,676, up 18.8% from the comparable quarter of 2013, at an average sales price of $272,316, up 7.9% from a year ago. The acquisition of Crown Communities added 254 to last quarter’s deliveries. DHI’s order backlog at the end was 11,365, up 14.7% from last June, at an average order price of $286,194, up 9.8% from a year ago.
In the company’s conference call Horton’s CEO characterized the overall demand for new homes last quarter as “relatively stable” compared to a year ago, but that Horton’s previous aggressive acquisition of land/lots, combined with more aggressive use of sales incentives to move inventory, enabled the company to boost its market share to its highest level ever. Another official said that the company increased sales incentives in MANY of its communities in order to meet its aggressive sales goals. The official noted that sales incentives were much lower than normal in 2013 and early 2014, but that last quarter (and currently) sales incentives were “back to normal.” Another official noted that home price appreciation had slowed appreciably.
PulteGroup reported that net home orders in the quarter ended June 30, 2014 totaled 4,778, down 2.2% from the comparable quarter of 2013. Sales per active community were up about 6% YOY, reflected the 6% YOY drop in community count. Pulte’s average net order price last quarter was $333,698, up 7.1% from a year ago. Home deliveries last quarter totaled 3,798, down 8.5% from the comparable quarter of 2013, at an average sales price of $328,000, up 11.6% from a year ago. The company’s order backlog at the end of June was 8,179, down 4.4% from last June, at an average order price of $338,689, up 6.8% from a year ago.
Meritage Homes reported that net home orders in the quarter ended June 30, 2014 totaled 1,647, up 0.6% from the comparable quarter of 2013. Net orders per community were down about 8.2% YOY. Meritage’s average net order price last quarter was $375,000, up 7.1% from a year ago. Home deliveries last quarter totaled 1,368, up 3.6% from the comparable quarter of 2013, at an average sales price of $368,000, up 11.5% from a year ago. The company’s order backlog at the end of June was 2,548, up 11.6% from last June, at an average order price of $373,000, up 5.7% from a year ago. Meritage owned or controlled about 25,800 lots at the end of June, up 14.2% from last June and up 44.5% from two years ago.
M/I Homes reported that net home orders in the quarter ended June 30, 2014 totaled 1,016, down 5.8% from the comparable quarter of 2013. Sales per community were down 14.4% YOY. Home deliveries last quarter totaled 894, up 13.5% from the comparable quarter of 2013, at an average sales price of $306,000, up 8.9% from a year ago. The company’s order backlog at the end of June was 1,647, down 1.7% from last June, at an average order price of $332,000, up 13.3% from a year ago. In its press release the company attributed the disappointed pace of new orders “primarily to delays in opening new communities and (to) lower traffic levels. Orders were especially weak in the Mid-Atlantic region, where orders were down 15.6% YOY. M/I owned or controlled 20,991 lots at the end of June, 22.3% from last June and up 98.1% from two years ago.
Here are some summary stats from large publicly-traded builders who have reported results for last quarter.
|Net Orders||Settlements||Average Closing Price|
|Qtr. Ended:||06/14||06/13||% Chg||06/14||06/13||% Chg||06/14||06/13||% Chg|
by Bill McBride on 7/24/2014 03:45:00 PM
From the National Multi Housing Council (NMHC): Apartment Markets Continue Expansion in July NMHC Quarterly Survey
Apartment markets continued to expand in the second quarter of 2014, as growth accelerated in all four indexes in the National Multifamily Housing Council (NMHC) Quarterly Survey of Apartment Market Conditions. The market tightness (68), sales volume (56), equity financing (58) and debt financing (68) indexes all improved from the first quarter this year and marked the second quarter in a row with all above the breakeven level of 50.
“Despite concerns in some quarters about the pace of new development, most markets appear to be absorbing new supply with no downward pressure on rents or vacancies,” said NMHC Senior Vice President of Research and Chief Economist Mark Obrinsky. “The improvement in market tightness was particularly noteworthy. Four years into the apartment industry recovery and expansion, the increase in demand continues to outstrip the pickup in new supply.”
The survey also asked about urban vs. suburban development. Four in ten (43 percent) reported an increased share of urban development relative to suburban in the last six months, compared to one quarter (27 percent) reporting an increased share of suburban development. Of the suburban development taking place, more than half (54 percent) reported more town center-style developments, with 39 percent reporting no appreciable change and 7 percent reporting more garden-style developments. [These results exclude “Don’t know/not applicable.”]
“Early in the recovery, apartment development was concentrated in downtown areas of large cities. While such areas continue to attract investment, new construction is expanding more broadly into suburbs as well. But developers are bringing urban style to suburban locations, with a heavier emphasis on ‘town center’ communities than we’ve seen in the past,” said Obrinsky.
The Market Tightness Index rose from 56 to 68. The percentage of respondents who saw looser conditions continued to decline, down from 20 percent to 15 percent. While this improvement is partly seasonal, the index is higher than the average for the July quarter since the survey began 15 years ago.
Click on graph for larger image.
This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. This indicates tighter market conditions.
As I've mentioned before, this index helped me call the bottom for effective rents (and the top for the vacancy rate) early in 2010. The apartment market is still solid right now.