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Friday, October 09, 2015

Hotel Occupancy: 2015 on pace for Best Year Ever

by Calculated Risk on 10/09/2015 01:05:00 PM

From HotelNewsNow.com: STR: US results for week ending 3 October

The U.S. hotel industry recorded positive results in the three key performance measurements during the week of 27 September through 3 October 2015, according to data from STR, Inc.

In year-over-year measurements, the industry’s occupancy increased 3.4% to 68.8%. Average daily rate for the week was up 8.0% to US$124.96. Revenue per available room increased 11.6% to finish the week at US$86.01.
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.  Hotels are now in the Fall business travel season.

Hotel Occupancy RateThe red line is for 2015, dashed orange is 2014, blue is the median, and black is for 2009 - the worst year since the Great Depression for hotels.  Purple is for 2000.

Special Note: I added 2001 (yellow) to show the impact of 9/11/2001 on hotel occupancy.  Occupancy was already down in 2001 due to the recession, and really collapsed following 9/11.

For 2015, the 4-week average of the occupancy rate is solidly above the median for 2000-2007, and above last year.

Right now 2015 is above 2000 (best year for hotels), and 2015 will probably be the best year ever for hotels.

Occupancy Year-to-date:
1) 2015 67.5%
2) 2000 66.9%
3) 2014 66.3%

Data Source: Smith Travel Research, Courtesy of HotelNewsNow.com

Q3 Review: Ten Economic Questions for 2015

by Calculated Risk on 10/09/2015 09:15:00 AM

At the end of each year, I post Ten Economic Questions for the coming year. I followed up with a brief post on each question. The goal was to provide an overview of what I expected in 2015 (I don't have a crystal ball, but I think it helps to outline what I think will happen - and understand - and change my mind, when the outlook is wrong).

By request, here is a quick Q3 review. I've linked to my posts from the beginning of the year, with a brief excerpt and a few comments:

10) Question #10 for 2015: How much will housing inventory increase in 2015?

Right now my guess is active inventory will increase further in 2015 (inventory will decline seasonally in December and January, but I expect to see inventory up again year-over-year in 2015). I expect active inventory to move closer to 6 months supply this summer.
According to the August NAR report on existing home sales, inventory was down 1.7% year-over-year in August, and the months-of-supply was at 5.2 months.  I still expect inventory to increase in 2015, but it could be close.

9) Question #9 for 2015: What will happen with house prices in 2015?
In 2015, inventories will probably remain low, but I expect inventories to continue to increase on a year-over-year basis. Low inventories, and a better economy (with more consumer confidence) suggests further price increases in 2015. I expect we will see prices up mid single digits (percentage) in 2015 as measured by these house price indexes.
If is still early - house price data is released with a lag - but the Case Shiller data for July showed prices up 4.7% year-over-year. The year-over-year change seems to be moving mostly sideways recently in the mid single digits.

8) Question #8 for 2015: How much will Residential Investment increase?
My guess is growth of around 8% to 12% for new home sales, and about the same percentage growth for housing starts. Also I think the mix between multi-family and single family starts might shift a little more towards single family in 2015.
Through August, even with a weak start to the year, starts were up 11.3% year-over-year compared to the same period in 2014.   New home sales were up 24% year-over-year through August - better than expected, but the comparisons will be more difficult going forward.   So far this is a better than expected.

7) Question #7 for 2015: What about oil prices in 2015?
It is impossible to predict an international supply disruption - if a significant disruption happens, then prices will obviously move higher. Continued weakness in Europe and China does seem likely - and I expect the frackers to slow down with exploration and drilling, but to continue to produce at most existing wells at current prices (WTI at $55 per barrel). This suggests in the short run (2015) that prices will stay well below $100 per barrel (perhaps in the $50 to $75 range) - and that is a positive for the US economy.
WTI futures are close to $50 per barrel.

6) Question #6 for 2015: Will real wages increase in 2015?
As the labor market tightens, we should start seeing some wage pressure as companies have to compete more for employees. Whether real wages start to pickup in 2015 - or not until 2016 or later - is a key question. I expect to see some increase in both real and nominal wage increases this year. I doubt we will see a significant pickup, but maybe another 0.5 percentage points for both, year-over-year.
Through September, nominal hourly wages were up 2.2 year-over-year .  I still expect a little more pick up over the next three months.

Note: I was more pessimistic than most on wages, and that was about right.

5) Question #5 for 2015: Will the Fed raise rates in 2015? If so, when?
The FOMC will not want to immediately reverse course, so the might wait a little longer than expected. Right now my guess is the first rate hike will happen at either the June, July or September meetings. 
June and September didn't happen.  It could even be late this year, or even next year.

4) Question #4 for 2015: Will too much inflation be a concern in 2015?
Due to the slack in the labor market (elevated unemployment rate, part time workers for economic reasons), and even with some real wage growth in 2015, I expect these measures of inflation will stay mostly at or below the Fed's target in 2015. If the unemployment rate continues to decline - and wage growth picks up - maybe inflation will be an issue in 2016.

So currently I think core inflation (year-over-year) will increase in 2015, but too much inflation will not be a serious concern this year.
Inflation was still low through August.

3) Question #3 for 2015: What will the unemployment rate be in December 2015?
Depending on the estimate for the participation rate and job growth (next question), it appears the unemployment rate will decline to close to 5% by December 2015. My guess is based on the participation rate staying relatively steady in 2015 - before declining again over the next decade. If the participation rate increases a little, then I'd expect unemployment in the low-to-mid 5% range.
The participation rate has mostly moved sideways this year, and the unemployment rate was 5.1% in September.  This is on track for close to 5% in December.

2) Question #2 for 2015: How many payroll jobs will be added in 2015?
Energy related construction hiring will decline in 2015, but I expect other areas of construction to be solid.

As I mentioned above, in addition to layoffs in the energy sector, exporters will have a difficult year - and more companies will have difficulty finding qualified candidates. Even with the overall boost from lower oil prices - and some additional public hiring, I expect total jobs added to be lower in 2015 than in 2014.

So my forecast is for gains of about 200,000 to 225,000 payroll jobs per month in 2015. Lower than 2014, but another solid year for employment gains given current demographics.
Through September 2015, the economy has added 1,779,000 jobs, or 198,000 per month.  I still expect employment gains to average 200,000 to 225,000 per month in 2015 (lower than 2014, but still solid).

1) Question #1 for 2015: How much will the economy grow in 2015?
Lower gasoline prices suggest an increase in personal consumption expenditures (PCE) excluding gasoline. And it seems likely PCE growth will be above 3% in 2015. Add in some more business investment, the ongoing housing recovery, some further increase in state and local government spending, and 2015 should be the best year of the recovery with GDP growth at or above 3%.
Once again the first quarter was disappointing due to the weather, cutbacks in the oil sector, the West Coast port slowdown and the strong dollar, but there was some bounce back in Q2.  It looks like GDP will be in the 2s again this year.  Based on the August Personal Income and Outlays report, PCE growth will probably be at or above 3% this year.

Overall, so far, 2015 is unfolding about as expected.

Thursday, October 08, 2015

Merrill on September CPI

by Calculated Risk on 10/08/2015 11:14:00 PM

With the Fed focused on inflation, here is an excerpt from Merrill Lynch research piece today on September CPI to be released next week:

We expect headline CPI to decline for the second straight month, growing -0.3% in September after a -0.1% reading for August. Weak energy prices should more than offset a slight increase in food prices this past month. Such a reading will once again push the annual headline CPI inflation rate slightly negative, at -0.2% yoy for September. Stripping out food and energy should result in a 0.1% increase in core CPI in September, matching the pace of the prior two months. As a result, the annual core inflation rate should hold steady at 1.8%. Inflation looks likely to move largely sideways for the rest of this year.

Demographic Impacts: Renting vs. Owning, Labor Force Participation, GDP

by Calculated Risk on 10/08/2015 04:44:00 PM

Here is a review of three key demographic points:

1) Demographics have been favorable for apartments, and will become more favorable for homeownership.

2) Demographics are the key reason the Labor Participation Rate has declined.

3) Demographics are a key reason real GDP growth is closer to 2% than 4%.

Renting vs. Owning

It was over five years ago that we started discussing the turnaround for apartments. Then, in January 2011, I attended the NMHC Apartment Strategies Conference in Palm Springs, and the atmosphere was very positive.

The drivers were 1) very low new supply, and 2) strong demand (favorable demographics, and people moving from owning to renting).

Demographics are still favorable, but my sense is the move "from owning to renting" has slowed. And more supply has been coming online.

On demographics, a large cohort has been moving into the 20 to 34 year old age group (a key age group for renters). Also, in 2015, based on Census Bureau projections, the two largest 5 year cohorts are 20 to 24 years old, and 25 to 29 years old (the largest cohorts are no longer be the "boomers").  Note: Household formation would be a better measure than population, but reliable data for households is released with a long lag.

Population 20 to 34 years old Click on graph for larger image.

This graph shows the population in the 20 to 34 year age group has been increasing.  This is actual data from the Census Bureau for 1985 through 2010, and current projections from the Census Bureau from 2015 through 2035.

The circled area shows the recent and projected increase for this group.

From 2020 to 2030, the population for this key rental age group is expected to remain mostly unchanged.

This favorable demographic is a key reason I've been positive on the apartment sector for the last five years - and I expect new apartment construction to stay relatively strong for a few more years.

And looking forward on demographics ...


Population 20 to 34 years oldThis graph shows the longer term trend for several key age groups: 20 to 29, 25 to 34, and 30 to 39 (the groups overlap).

This graph is from 1990 to 2060 (all data from BLS: current to 2060 is projected).

We can see the surge in the 20 to 29 age group (red).  Once this group exceeded the peak in earlier periods, there was an increase in apartment construction.  This age group will peak in 2018 (until the 2030s), and the 25 to 34 age group (orange, dashed) will peak in 2023.  This suggests demand for apartments will soften starting around 2020 +/-.

For buying, the 30 to 39 age group (blue) is important (note: see Demographics and Behavior for some reasons for changing behavior).  The population in this age group is increasing, and will increase significantly over the next 10+ years.  

This demographics is positive for home buying, and this is a key reason I expect single family housing starts to continue to increase in coming years.

Labor Force Participation

A significant decline in the participation rate was expected based on demographics (there is an ongoing debate about how much is due to demographics, and how much of the decline is cyclical - however, as I've pointed out many time, a careful analysis suggests most of the decline is due to demographics).

But what about the decline in the prime working age labor force participation rate?

Each month I post the following graph of the participation rate and employment-population rate for prime working age (25 to 54 years old) workers. The following graph is through the September report.

Employment Population Ratio, 25 to 54In the earlier period the participation rate for this group was trending up as women joined the labor force. Starting in the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate decreased in September to 80.6%, and the 25 to 54 employment population ratio was unchanged at 77.2%.

A couple of key points:

1) Analyzing and forecasting the labor force participation requires looking at a number of factors. Everyone is aware that there is a large cohort has moved into the 50 to 70 age group, and that that has pushing down the overall participation rate. Another large cohort has been moving into the 16 to 24 year old age group - and many in this cohort are staying in school (a long term trend that has accelerated recently) - and that is another key factor in the decline in the overall participation rate.

2) But there are other long term trends. One of these trends is for a decline in the participation rate for prime working age men (25 to 54 years old).   For some reasons, see: Possible Reasons for the Decline in Prime-Working Age Men Labor Force Participation and on demographics from researchers at the Atlanta Fed: "Reasons for the Decline in Prime-Age Labor Force Participation"

First, here is a graph of the participation rate by 5 year age groups for the years 2000, 2005, 2010, and 2015.

Labor Force Participation Rate, Age Groups, 2000 - 2015
1) the participation rate for the "prime working age" (25 to 54) is fairly flat (the six highest participation rates).

2) However, the lowest participation rate is for the 50 to 54 age group.

3) And notice that the participation rate for EACH prime age group was declining BEFORE the recession.  (Dark blue is January 2000, and light blue is January 2005).

Everyone is aware that there large cohorts moving into retirement - and a large cohort in the 20 to 24 age group - but there has also been in a shift in the prime working age groups.

Labor Force Participation Rate, Percent Prime by Age GroupThis graph shows the percent of the prime working age population in each 5 year age group.  Note: Jumps are due to changes in population control.

Since the lowest prime participation is for the 50 to 54 age group (the second lowest is for the 25 to 29 age group), lets focus on those two groups. The 50 to 54 age group is the red line (now the largest percentage of the prime working age) and the 25 to 29 age group is the blue line (now the second largest percentage).  Just these shifts in prime demographics would lead to a somewhat lower prime working age participation rate.    Overall, the impact of this shift is small compared to long term trends.

Lets focus on just one age group and just for men to look at the long term trend.

Labor Force Participation Rate, Men, 40 to 44 Click on graph for larger image.

This fourth graph shows the 40 to 44 year old men participation rate since 1976 (note the scale doesn't start at zero to better show the change).

There is a clear downward trend, and a researcher looking at this trend in the year 2000 might have predicted the 40 to 44 year old men participation rate would about the level as today (see trend line).

Clearly there are other factors than "economic weakness" causing this downward trend.   I listed some reasons a few months ago, and new research from Pew Research suggests stay-at-home dads is one of the reasons: Growing Number of Dads Home with the Kids

Labor Force Participation Rate, Men, Prime Age GroupsThis graph shows the trends for each prime working age men 5-year age group.

Note: This is a rolling 12 month average to remove noise (data is NSA), and the scale doesn't start at zero to show the change.

Clearly there is a downward trend for all 5 year age groups. When arguing about the decline in the prime participation rate, we need to take these long term trends into account.

Labor Force Participation Rate, Men, Prime Age GroupsAnd this graph shows the same data but with the full scale (0% to 100%).  The trend is still apparent, but the decline has been gradual.

The bottom line is that the participation rate was declining for prime working age workers before the recession, there the key is understand and adjusting for the long term trend..

Here is a look at the participation rate of women in the prime working age groups over time.

Labor Force Participation Rate, Women, Prime Age GroupsThe graph shows the trends for each prime working age women 5-year age group.

Note: This is a rolling 12 month average to remove noise (data is NSA), and the scale doesn't start at zero to show the change.

For women, the participation rate increased significantly until the late 90s, and then started declining slowly.  This is a more complicated story than for men, and that is why I used prime working age men to show the gradual downward decline in participation that has been happening for decades (and is not just recent economic weakness).

Labor Force Participation Rate, Women, Prime Age GroupsThe second graph shows the same data for women but with the full scale (0% to 100%).  The upward participation until the late 80s is very clear, and the decline since then has been gradual.

The bottom line is that the participation rate was declining for prime working age workers before the recession, there are several reasons for this decline (not just recent "economic weakness") and the prime working age participation rate is probably close to expected without the recession.

GDP: 2% is the New 4%

And a third key point: We should have been expecting slower growth this decade due to demographics - even without the housing bubble-bust and financial crisis.

One simple way to look at the change in GDP is as the change in the labor force, times the change in productivity. If the labor force is growing quickly, GDP will be higher with the same gains in productivity. And the opposite is true.

So here is a graph of the year-over-year change in the labor force since 1950 (data from the BLS).

Year-over-year Change Labor ForceClick on graph for larger image

The data is noisy - because of changes in population controls and the business cycle - but the pattern is clear as indicated by the dashed red trend line. The labor force has been growing slowly recently but the rate of increase has been declining for some time.

We could also look at just the prime working age population - I've pointed out before the that prime working age population has just started growing again after declining for a few years (see See: Prime Working-Age Population Growing Again)

Now here is a look at real GDP for the same period.

Year-over-year Change GDPThe GDP data (year-over-year quarterly) is also noisy, and the dashed blue line shows the trend.

GDP was high in the early 50s - and early-to-mid 60s because of government spending (Korean and Vietnam wars).  As in example, in 1951, national defense added added 6.5 percentage points to GDP.  Of course we don't want another war ...

Now lets put the two graphs together.

Year-over-year Change Labor Force and GDPOther than the early period with a boost from government spending, the growth in GDP has been tracking the growth in the labor force pretty well.  The difference in growth between the dashed blue and red lines is due to gains in productivity.

The good news is that will change going forward (prime working age population will grow faster next decade).  But right now, due to demographics, 2% real GDP growth is the new 4%.

FOMC Minutes: Waiting on Inflation

by Calculated Risk on 10/08/2015 02:05:00 PM

From the Fed: Minutes of the Federal Open Market Committee, September 16-17, 2015 . Excerpts:

In assessing whether economic conditions had improved sufficiently to initiate a firming in the stance of policy, many members said that the improvement in labor market conditions met or would soon meet one of the Committee's criteria for beginning policy normalization. But some indicated that their confidence that inflation would gradually return to the Committee's 2 percent objective over the medium term had not increased, in large part because recent global economic and financial developments had imparted some restraint to the economic outlook and placed further downward pressure on inflation in the near term. Most members agreed that their confidence that inflation would move to the Committee's inflation objective would increase if, as expected, economic activity continued to expand at a moderate rate and labor market conditions improved further. Many expected those conditions to be met later this year, although several members were concerned about downside risks to the outlook for real activity and inflation.

Other factors important to the Committee's assessment of the inflation outlook were the expectation that the influences of lower energy and commodity prices on headline inflation would abate, as had occurred in previous episodes, and that inflation expectations would remain stable. With energy and commodity prices expected to stabilize, members' projections of inflation incorporated a step-up in headline inflation next year. However, several members saw a risk that the additional downward pressure on inflation from lower oil prices and a higher foreign exchange value of the dollar could persist and, as a result, delay or diminish the expected upturn in inflation. And, while survey measures of longer-run inflation expectations remained stable, a couple of members expressed unease with the decline in market-based measures of inflation compensation over the intermeeting period.

After assessing the outlook for economic activity, the labor market, and inflation and weighing the uncertainties associated with the outlook, all but one member concluded that, although the U.S. economy had strengthened and labor underutilization had diminished, economic conditions did not warrant an increase in the target range for the federal funds rate at this meeting. They agreed that developments over the intermeeting period had not materially altered the Committee's economic outlook. Nevertheless, in part because of the risks to the outlook for economic activity and inflation, the Committee decided that it was prudent to wait for additional information confirming that the economic outlook had not deteriorated and bolstering members' confidence that inflation would gradually move up toward 2 percent over the medium term. One member, however, preferred to raise the target range for the federal funds rate at this meeting, indicating that the current low level of real interest rates was not appropriate in the context of current economic conditions.
emphasis added

Las Vegas Real Estate in September: Sales Increased 10% YoY, Inventory Down YoY

by Calculated Risk on 10/08/2015 10:52:00 AM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported GLVAR Report on Local Housing Market Suggests Predictable Can Be Positive

Local home prices remained remarkably stable in September, according to a report released Thursday by the Greater Las Vegas Association of REALTORS® (GLVAR). GLVAR President Keith Lynam ... said the 2015 trend toward increasingly stable home prices and gradually increasing home sales is a healthy one for homeowners.
...
According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in September was 3,285, up from 2,982 one year ago. Compared to September 2014, 14.3 percent more homes, but 6.3 percent fewer condos and townhomes, sold this September. So far in 2015, Lynam said local home sales remain ahead of last year’s sales pace.

For more than two years, GLVAR has been reporting fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. In September, 6.8 percent of all local sales were short sales – which occur when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 10.4 percent one year ago. Another 7.1 percent of September sales were bank-owned, down from 8.8 percent one year ago.
...
By the end of September, GLVAR reported 8,134 single-family homes listed without any sort of offer. That’s down 0.8 percent from one year ago. For condos and townhomes, the 2,311 properties listed without offers in September represented a 4.3 percent decrease from one year ago.
emphasis added
There are several key trends that we've been following:

1) Overall sales were up 10.2% year-over-year.

2) Conventional (equity, not distressed) sales were up 17% year-over-year.  In Sept 2014, 80.8% of all sales were conventional equity.  In Sept 2015, 86.1% were standard equity sales.

3) The percent of cash sales has declined year-over-year from 34.3% in Sept 2014 to 26.8% in Sept 2015. (investor buying appears to be declining).

4) Non-contingent inventory is down 0.8% year-over-year. This was the first YoY decline in inventory since 2013.  The table below shows the year-over-year change for non-contingent inventory in Las Vegas. Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year. It appears the inventory build might be over.


Las Vegas: Year-over-year
Change in Non-contingent
Inventory
MonthYoY
Jan-13-58.3%
Feb-13-53.4%
Mar-13-42.1%
Apr-13-24.1%
May-13-13.2%
Jun-133.7%
Jul-139.0%
Aug-1341.1%
Sep-1360.5%
Oct-1373.4%
Nov-1377.4%
Dec-1378.6%
Jan-1496.2%
Feb-14107.3%
Mar-14127.9%
Apr-14103.1%
May-14100.6%
Jun-1486.2%
Jul-1455.2%
Aug-1438.8%
Sep-1429.5%
Oct-1425.6%
Nov-1420.0%
Dec-1418.0%
Jan-1512.9%
Feb-1515.8%
Mar-1512.2%
Apr-157.6%
May-157.8%
Jun-154.3%
Jul-155.1%
Aug-153.5%
Sep-15-0.8%

Weekly Initial Unemployment Claims decreased to 263,000

by Calculated Risk on 10/08/2015 08:35:00 AM

The DOL reported:

In the week ending October 3, the advance figure for seasonally adjusted initial claims was 263,000, a decrease of 13,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 277,000 to 276,000. The 4-week moving average was 267,500, a decrease of 3,000 from the previous week's revised average. The previous week's average was revised down by 250 from 270,750 to 270,500.

There were no special factors impacting this week's initial claims.
The previous week was revised down to 276,000.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.


The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 267,500.

This was below the consensus forecast of 271,000, and the low level of the 4-week average suggests few layoffs.

Wednesday, October 07, 2015

Thursday: FOMC Minutes, Unemployment Claims

by Calculated Risk on 10/07/2015 08:16:00 PM

Some excerpts on the stock market from Aleksandar Timcenko and Noah Weisberger at Goldman Sachs (this is their view):

After hitting an all-time high in late July, the S&P 500 subsequently declined more than 12% over the following month. This type of price action qualifies as a ‘drawdown’, using the definition developed in this piece. We examine recent global equity price action in the context of past drawdowns, and look at why they occur and what accounts for their severity. Lastly, we discuss the post-drawdown environment.
...
We find that the size and speed of the recent equity drawdowns are within historical norms; that they are more likely to occur (and more likely to be large) when economic growth is deteriorating, when multiples have increased and when returns have climbed above trend; and that markets tend to revert to their previous trends.

This suggests that, if – as we expect – the macroeconomic picture stabilises, recent equity downturns will slowly and steadily reverse course.
Thursday:
• At 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for 271 thousand initial claims, down from 275 thousand the previous week.

• At 2:00 PM, the Fed will release the FOMC Minutes for the Meeting of September 16-17, 2015

Defeatists Policies #NothingCanBeDone

by Calculated Risk on 10/07/2015 05:01:00 PM

A personal comment ...

Over the last several years, I noted on several occasions that Congress has been a disaster.  They've opposed economic policies normally supported by both parties - and by Milton Friedman and Ronald Reagan - and this has hurt the economy.  Former Fed Chairman Ben Bernanke noted in his book: “I also felt frustrated that fiscal policy makers, far from helping the economy, appeared to be actively working to hinder it.”
emphasis added

I agree with Bernanke.

This seems to part of a defeatists theme of the current Congress - an overwhelming pessimism about several policies -"Nothing can be done" could be their slogan (or worse when they "actively work to hinder" the economy).

Former Fed Chairman Ben Bernanke also wrote in this book that he “lost patience with Republicans’ susceptibility to the know-nothing-ism of the far right." He went on to write: “I often said that monetary policy was not a panacea — we needed Congress to do its part. After the crisis calmed, that help was not forthcoming.”
emphasis added

And here is another excerpt from Bernanke's book via the WSJ, Bernanke on Congress:

"They blamed the crisis on the Fed and on Fannie (Mae) and Freddie (Mac), with little regard for the manifest failings of the private sector, other regulators, or, most especially, Congress itself. They condemned bailouts as giveaways of taxpayer money without considering the broader economic consequences of the collapse of systemically important firms. They saw inflation where it did not exist and, when the official data did not bear out their predictions, invoked conspiracy theories. They denied that monetary or fiscal policy could support job growth, while still working to direct federal spending to their own districts. They advocated discredited monetary systems, like the gold standards.
This defeatist view - and pessimistic outlook - applies to other policies too. As an example, during the recent debate, GOP presidential hopefuls Marco Rubio and Carly Fiorina acknowledged the dangers of climate change (a positive step compared to the deniers), but both said Nothing Can be Done. How sadly pessimistic and contrary to the optimism of Presidents Kennedy and Reagan.

I believe steps can be taken to address climate change with minimal impact on the economy - people are resourceful.  In the '70s, when it was discovered that chlorofluorocarbons were damaging the ozone, the "do nothing" crowd claimed action would damage the economy, and cars would no longer have air conditioning. Action was taken, and the economy was fine (and the AC in my car still works).

On a personal note, one of my college professors, Sherwood Rowland, won the Nobel prize for discovering the role of chlorofluorocarbons in ozone depletion. I chatted with Professor Rowland in 2008, and we discussed the science of climate change (My undergraduate degree is in Chemistry). Dr. Rowland was extremely concerned about the impacts of climate change, and clearly frustrated with the politics of the deniers.

And we also hear "nothing can be done" about the ongoing mass shooting in the U.S., even though most Americans support stricter background checks, longer waiting periods, and restricting certain types of weapons.  Reagan supported gun control, but not this Congress.  Something can be done - and will be done eventually.  Hopefully "Before some ol' fool come around here, Wanna shoot either you or me".

I'm optimistic about the future and I share Bernanke's view that"the United States [is] one of the most attractive places to live, work and invest over the next few decades".  But we need better policymakers in Congress.

Phoenix Real Estate in September: Sales up 12%, Inventory down 12%

by Calculated Risk on 10/07/2015 02:02:00 PM

This is a key distressed market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

For the tenth consecutive month, inventory was down year-over-year in Phoenix. This is a significant change from last year.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in September were up 11.6% year-over-year.

2) Cash Sales (frequently investors) were down to 22.6% of total sales.

3) Active inventory is now down 11.7% year-over-year.  

More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.

Now, with falling inventory, prices are increasing a little faster in 2015 (something to watch if inventory continues to decline).   Prices are already up 3.0% through July (prices increased more in 7 months in 2015, than all of 2014).

September Residential Sales and Inventory, Greater Phoenix Area, ARMLS
  SalesYoY
Change
Sales
Cash
Sales
Percent
Cash
Active
Inventory
YoY
Change
Inventory
Sept-086,179---1,04116.8%54,4271---
Sept-097,90728.0%2,77635.1%38,340-29.6%
Sept-106,762-14.5%2,90442.9%45,20217.9%
Sept-117,89216.7%3,47044.0%26,950-40.4%
Sept-126,478-17.9%2,84944.0%21,703-19.5%
Sept-136,313-2.5%2,10633.4%23,4057.8%
Sept-146,252-1.0%1,60925.7%26,49213.2%
Sept-156,98011.6%1,57322.5%23,396-11.7%
1 September 2008 probably includes pending listings