by Calculated Risk on 2/14/2014 06:14:00 PM

A couple of articles ...

From Thomas Curwen at the LA Times: They'll be pouring it on at New Wilshire Grand site

The latest addition to the Los Angeles skyline — the New Wilshire Grand, the tallest structure to be built west of the Mississippi — takes a major step forward Saturday when more than 2,000 truckloads of concrete are driven through downtown for what is being billed as the world's largest continuous concrete pour.
...
The New Wilshire Grand will feature five levels of subterranean parking, convention space, office suites and a 900-room hotel in the signature tower, which will rise 1,100 feet from the street to the top of its architectural spire.

And from Roger Vincent at the LA Times: Chinese developer unveils plans for Metropolis project in L.A.

Chinese real estate developer Greenland Group revealed plans Friday for a quick start on the first phase of its $1-billion Metropolis Los Angeles project that is expected to redefine the downtown skyline.

Work is set to begin shortly on a high-rise hotel and a residential skyscraper on what is now a vast parking lot along the 110 Freeway north of Staples Center and LA Live. The buildings should be open by 2016.

One of the reasons I think economic growth will increase in 2014 is that there should be a pickup in Commercial Real Estate (CRE) development this year.

by Calculated Risk on 2/14/2014 02:06:00 PM

From HotelNewsNow.com: STR: US results for week ending 8 February

The U.S. hotel industry posted positive results in the three key performance measurements during the week of 2-8 February 2014, according to data from STR.

In year-over-year measurements, the industry’s occupancy increased 0.3 percent to 56.2 percent. Average daily rate rose 2.9 percent to finish the week at US$110.40. Revenue per available room for the week was up 3.2 percent to finish at US$62.06.
emphasis added

The 4-week average of the occupancy rate is close to normal levels.

Note: ADR: Average Daily Rate, RevPAR: Revenue per Available Room.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2014 and black is for 2009 - the worst year since the Great Depression for hotels.

Through Feb 8th, the 4-week average of the occupancy rate is slightly higher than the same period last year and is tracking at pre-recession levels.   

It looks like 2014 should be a solid year for hotels.

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

by Calculated Risk on 2/14/2014 09:55:00 AM

Click on graph for larger image.

The preliminary Reuters / University of Michigan consumer sentiment index for February was at 81.2, unchanged from January.

This was above the consensus forecast of 80.0. Sentiment has generally been improving following the recession - with plenty of ups and downs - and a big spike down when Congress threatened to "not pay the bills" in 2011, and another smaller spike down last October and November due to the government shutdown.

I expect to see sentiment at post-recession highs very soon.

by Calculated Risk on 2/14/2014 09:15:00 AM

From the Fed: Industrial production and Capacity Utilization

Industrial production decreased 0.3 percent in January after having risen 0.3 percent in December. In January, manufacturing output fell 0.8 percent, partly because of the severe weather that curtailed production in some regions of the country. Additionally, manufacturing production is now reported to have been lower in the fourth quarter; the index is now estimated to have advanced at an annual rate of 4.6 percent in the fourth quarter rather than 6.2 percent. The output of utilities rose 4.1 percent in January, as demand for heating was boosted by unseasonably cold temperatures. The production at mines declined 0.9 percent following a gain of 1.8 percent in December. At 101.0 percent of its 2007 average, total industrial production in January was 2.9 percent above its level of a year earlier. The capacity utilization rate for total industry decreased in January to 78.5 percent, a rate that is 1.6 percentage points below its long-run (1972–2013) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 11.6 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 78.5% is still 1.6 percentage points below its average from 1972 to 2012 and below the pre-recession level of 80.8% in December 2007.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased 0.3% in January to 101.0. This is 21% above the recession low, and slightly above the pre-recession peak.

The monthly change for both Industrial Production and Capacity Utilization were well below expectations, and previous months were revised down.

by Calculated Risk on 2/13/2014 09:22:00 PM

First, here is a price index for commercial real estate that I follow. From CoStar: Commercial Real Estate Pricing Gains Momentum in 2013

COMMERCIAL REAL ESTATE RECOVERY ADVANCES IN 2013: The recovery in U.S. commercial real estate advanced in 2013 as broad gains in net absorption, rents, sales activity and pricing extended across markets and property types. Driven by steady economic growth and solid job gains of 2.2 million in 2013, aggregate net absorption across the four major property types was the highest since the recovery began. Meanwhile, new supply remained well in hand, with the exception of the multifamily property sector, which has seen a notable increase in new construction. Vacancy rates fell across the board, reaching new cyclical lows in both the apartment and industrial sectors over the last year.
...
RENTS TRENDING UP AS VACANCY DECLINES: The improvement in market fundamentals has tilted pricing power in the favor of landlords. Rents have surged 14% from the trough of the cycle in the apartment market, with more modest rent recoveries of near 6% in the office and industrial segments since bottoming out in late 2010/early 2011. Even the beleaguered retail property sector, which experienced rent losses into 2012, saw a turnaround in the last year, with retail rents growing a modest 1.9% in 2013. Investor demand for all commercial property types also remained strong, as overall sales volume increased 16% from 2012.
...
IMPROVING MARKET FUNDAMENTALS FUEL PRICING GAINS: The two broadest measures of commercial property pricing in the CCRSI, the U.S. value-weighted index and U.S. equal-weighted index, each posted strong gains of 11.2% and 7.6%, respectively, in 2013. Reflecting the stronger price appreciation of larger properties in core markets, pricing in the value-weighted index has now risen to within 5.5% below the previous peak level set in 2007. Meanwhile, the equal-weighted index, which is more heavily influenced by smaller transactions, is still 25% below the prior peak
emphasis added

Note: These are repeat sales indexes - like Case-Shiller for residential - but this is based on far fewer pairs.

Friday:
• At 9:15 AM ET, the The Fed will release Industrial Production and Capacity Utilization for January. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 79.3%.

• At 9:55 AM, the Reuter's/University of Michigan's Consumer sentiment index (preliminary for February). The consensus is for a reading of 80.0, down from 81.2 in January.

by Calculated Risk on 2/13/2014 04:14:00 PM

Economist Tom Lawler sent me the preliminary table below of short sales, foreclosures and cash buyers for several selected cities in January.

From CR: This is just a few markets - more to come - but total "distressed" share is down significantly in these markets, mostly because of a decline in short sales.

And foreclosures are down in all of these areas too.


The All Cash Share (last two columns) is mostly declining year-over-year.  As investors pull back in markets the share of all cash buyers will probably decline.

In general it appears the housing market is slowly moving back to normal.

	Short Sales Share		Foreclosure Sales Share		Total "Distressed" Share		All Cash Share
	Jan-14	Jan-13	Jan-14	Jan-13	Jan-14	Jan-13	Jan-14	Jan-13
Las Vegas	17.0%	36.2%	11.0%	12.5%	28.0%	48.7%	46.3%	56.1%
Reno**	16.0%	41.0%	9.0%	10.0%	25.0%	51.0%
Phoenix	6.8%	17.6%	9.6%	16.2%	16.5%	33.8%	36.3%	44.1%
Minneapolis	5.4%	10.3%	24.0%	31.9%	29.4%	42.2%
Mid-Atlantic	8.5%	13.1%	12.2%	12.7%	20.7%	25.8%	22.9%	22.0%
So. California*	12.2%	24.2%	6.6%	17.2%	18.8%	41.4%	29.1%	33.7%
Hampton Roads					29.5%	34.9%
Toledo							43.9%	44.4%
Des Moines							22.2%	26.8%
Tucson							38.2%	36.7%
Omaha							26.4%	21.3%
Memphis*			19.1%	25.9%
*share of existing home sales, based on property records **Single Family Only

by Calculated Risk on 2/13/2014 12:51:00 PM

From the MBA: New Home Purchases Up Sharply in January 2014

MBA estimates that sales of new single-family homes were running at a seasonally adjusted annual rate of 543,000 units in January 2014, based on data from MBA’s Builder Applications Survey.

“While the big jump may appear to conflict with other data, such as MBA’s purchase application index and NAR’s existing home sales data that point to a weak market for existing homes, our Builder Application Survey estimate is consistent with reports of homebuilder sentiment that show strength in the market for new homes,” said Mike Fratantoni, MBA’s Chief Economist. “It is also worth noting that the significant January increase also followed a particularly slow pace of sales in November and December.”

The estimated 543,000 unit sales pace for January was an increase of 35 percent from December’s pace of 402,000 units. On an unadjusted basis, the MBA estimates that there were 38,000 new home sales in January 2014, a 36 percent increase from the level of 28,000 units in December 2013. The new home sales estimate is derived using mortgage application information from the BAS, as well as assumptions regarding market coverage and other factors.

A few comments:

1) The MBA Builder survey might be helpful in predicting Census Bureau reports, but there are larger swings in the MBA survey estimates (so the Census Bureau might report an increase for January, but not of the same magnitude as the MBA increase).

2) Last year, in January, the MBA estimates sales of 507 thousand (SAAR), and the Census Bureau reported sales at a 437 thousand pace (eventually revised up to 458 thousand).   So there might be revisions too.

3) Note that for December, the Census Bureau reported sales of 414 thousand (SAAR), and the MBA estimated sales at a 402 thousand pace.  I expect Census Bureau reported sales for December to be revised down.

by Calculated Risk on 2/13/2014 11:01:00 AM

From housing economist Tom Lawler:

Based on local realtor/MLS results I have seen so far, I would estimate that existing home sales as estimated by the National Association of Realtors in January will be about 275,000 on an unadjusted basis, down 5.8% from last January’s unadjusted pace. “Guessing” NAR’s seasonally adjusted estimate this month, however, is trickier than usual, because in the January report the NAR incorporates annual revisions in the seasonal factors used to “transform” unadjusted estimates to seasonally adjusted estimates, and in lately these revisions have been considerable. While someone with the specific version of the seasonal adjustment program used by the NAR (as well as specifics about methodology – e.g., are regional estimates adjusted and then summed, or are national estimates first adjusted and then regional estimates are constrained to the national estimates) could produce the 2014 seasonal factors (and the revised factors for previous years), I am not such a person.

Based on what I THINK the seasonal factor for January should be (not much different from last January), I estimate that existing home sales as measured by the NAR will come in at a seasonally adjusted annual rate of about 4.67 million, down 4.1% from December’s SA pace, and down 5.5% from last January’s SA pace.

While this number might seem “low” – it would be the slowest SA sales pace since July 2012 – it’s not that surprising given (1) the big declines (adjusted for “seasonals”) in pending sales seen in many parts of the country in December; and (2) the unusually bad weather in many parts of the country last month.

While a number this low (or conceivably lower) will be attributed by many as being mainly weather related, in fact that is not the case. To be sure, sales were depressed by adverse weather conditions in many parts of the country last month. By the same token, however, the steep declines in pending sales in December in many parts of the country were not weather related. In fact, some of the biggest YOY declines in pending sales in December were in areas unaffected by weather but where (1) distressed sales AND investor buying were down sharply; and (2) where purchases by owners were flat to down. Some other areas, including the DC metro area, also saw unusually weak pending sales in December, when weather was not unusually “bad.”

by Calculated Risk on 2/13/2014 09:35:00 AM

On a monthly basis, retail sales decreased 0.4% from December to January (seasonally adjusted), and sales were up 2.6% from January 2013. Sales in November were revised down from a 0.2% increase to a 0.1% decrease. From the Census Bureau report:

The U.S. Census Bureau announced today that advance estimates of U.S. retail and food services sales for January, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $427.8 billion, a decrease of 0.4 percent from the previous month, but 2.6 percent above January 2013. ... The November to December 2013 percent change was revised from +0.2 percent to -0.1 percent.

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).


Retail sales ex-autos were unchanged. 

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail sales ex-gasoline increased by 3.3% on a YoY basis (2.6% for all retail sales).

The decrease in January was below consensus expectations.

by Calculated Risk on 2/13/2014 09:20:00 AM

The DOL reports:

In the week ending February 8, the advance figure for seasonally adjusted initial claims was 339,000, an increase of 8,000 from the previous week's unrevised figure of 331,000. The 4-week moving average was 336,750, an increase of 3,500 from the previous week's revised average of 333,250.

The previous week was unrevised.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 increased to 336,750.

This was the higher than the consensus forecast of 330,000.