RSS Feed by Calculated Risk on 11/10/2015 02:32:00 PM
Tuesday, November 10, 2015
Las Vegas: On Pace for Record Visitor Traffic in 2015, Conventions Returning
Another update ... during the recession, I wrote about the troubles in Las Vegas and included a chart of visitor and convention attendance: Lost Vegas.
Since then Las Vegas visitor traffic recovered to a new record high in 2014.
We only have data through September 2015, but visitor traffic is 2.4% above the record 2014 pace so far.
And convention attendance is returning. Here is the data from the Las Vegas Convention and Visitors Authority.
Click on graph for larger image.
The blue bars are annual visitor traffic (left scale), and the red line is convention attendance (right scale).
Through September, visitor traffic in 2015 is running 2.4% above 2014.
Convention traffic is up 5.3% from last year, but is still below the pre-recession peak. In general, the gamblers are back - and the conventions are returning.
It seemed like there were many housing related conventions during the housing bubble, so it may be some time before convention attendance hits a new high.
Duy's Fed Watch: "Onto The Next Question"
by Calculated Risk on 11/10/2015 11:43:00 AM
Some excerpts from a piece by Tim Duy: Onto The Next Question
It would seem that a December rate hike is all but certain barring some dramatic deterioration in financial conditions. The October employment report should remove any residual concerns among FOMC members over the underlaying pace of activity, clearing the way for the Fed to make good on the strongly worded October FOMC statement. Given the resilience of recent trends, it is tough to see that even a weak-ish November employment report would dissuade the Fed from hiking rates. Quite frankly, regardless of whether you think they should hike rates, if they don't hike rates, the divergence between what they say and what they do would become truly untenable from a communications perspective.
...
The question now arises, however, of what is "gradual"? The general consensus is the "gradual" means 25bp every other meeting. ...
...
Has the Fed already waited too long to sustain a path of 25bp every other meeting? That is what we should be asking. Indeed, I believe the next labor report will have more implications for the January meeting than the December meeting. ...
Bottom Line: The debate is shifting. It is soon to be no longer about the first rate hike. Fed officials, the question is shifting from whether they should go at all to whether they waited too long.
NFIB: Small Business Optimism Index unchanged in October
by Calculated Risk on 11/10/2015 09:30:00 AM
From the National Federation of Independent Business (NFIB): Small Business Optimism Flat Lined in October
The Index of Small Business Optimism was unchanged in October, posting no change after a rise of only 0.2 points in September and a gain of only 0.5 points in August. ...
Although the labor market components posted minor declines, they held at historically strong levels ...
emphasis added
Click on graph for larger image.This graph shows the small business optimism index since 1986.
The index was unchanged at 96.1 in October.
Monday, November 09, 2015
Employment: October Diffusion Indexes
by Calculated Risk on 11/09/2015 04:41:00 PM
Some more positive news in the employment report.
The BLS diffusion index for total private employment was at 61.8 in October, up from 53.4 in September.
For manufacturing, the diffusion index was at 51.9, up from 37.5 in September.
Think of this as a measure of how widespread job gains are across industries. The further from 50 (above or below), the more widespread the job losses or gains reported by the BLS. Above 60 is very good. From the BLS:
Figures are the percent of industries with employment increasing plus one-half of the industries with unchanged employment, where 50 percent indicates an equal balance between industries with increasing and decreasing employment.
Overall private job growth was widespread in October.
Update: Framing Lumber Prices down Sharply Year-over-year
by Calculated Risk on 11/09/2015 01:58:00 PM
Here is another graph on framing lumber prices. Early in 2013 lumber prices came close to the housing bubble highs.
The price increases in early 2013 were due to a surge in demand (more housing starts) and supply constraints (framing lumber suppliers were working to bring more capacity online).
Prices didn't increase as much early in 2014 (more supply, smaller "surge" in demand).
In 2015, even with the pickup in U.S. housing starts, prices are down year-over-year. Note: Multifamily starts do not use as much lumber as single family starts, and there was a surge in multi-family starts.
Overall the decline in prices is probably due to more supply, and less demand from China.
Click on graph for larger image in graph gallery.
This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through October 2015 (via NAHB), and 2) CME framing futures.
Right now Random Lengths prices are down about 12% from a year ago, and CME futures are down around 21% year-over-year.
Housing: Inventory Build is Over in some Former Distressed Markets
by Calculated Risk on 11/09/2015 10:49:00 AM
Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.
And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.
I don't have a crystal ball, but watching inventory helps understand the housing market. If inventory kept increasing rapidly in certain markets, then we would eventually see price declines. However it now appears the inventory build is over in some former distressed markets.
The table below shows the year-over-year change for non-contingent inventory in Las Vegas, Phoenix and Sacramento (October 2015 not available yet for Phoenix and Sacramento). Inventory declined sharply through early 2013, and then inventory started increasing sharply year-over-year.
This makes sense. Prices increased rapidly in these markets in 2012 and 2013 (bouncing off the bottom with low inventory). Higher prices attracted more people to list their homes. Once prices flattened out, potential sellers weren't as motivated to list their homes. Unlike following the housing bubble, most of these potential sellers probably don't need to sell, so listings didn't grow to the moon!
Now listing are starting to decline, so prices might increase a little quicker. As an example, according to Case-Shiller, prices in Phoenix only increased 2.4% in 2014, but have increased 3.5% already this year through August. For Phoenix, the inventory build ended near the end of 2014.
For Las Vegas, the inventory might have just ended a couple of months ago. If inventory continues to decline, it seems likely price increases will pick up in Las Vegas.
I still expect overall inventory to continue to increase nationally, but this is something to watch.
| Year-over-year Change in Active Inventory | |||
|---|---|---|---|
| Month | Las Vegas | Phoenix | Sacramento |
| Jan-13 | -58.3% | -11.7% | -61.1% |
| Feb-13 | -53.4% | -8.5% | -51.1% |
| Mar-13 | -42.1% | -5.2% | -37.8% |
| Apr-13 | -24.1% | -4.9% | -10.3% |
| May-13 | -13.2% | -2.1% | 5.3% |
| Jun-13 | 3.7% | -1.6% | 18.3% |
| Jul-13 | 9.0% | -1.6% | 54.3% |
| Aug-13 | 41.1% | 2.4% | 46.8% |
| Sep-13 | 60.5% | 7.8% | 77.3% |
| Oct-13 | 73.4% | 15.7% | 93.2% |
| Nov-13 | 77.4% | 15.2% | 56.8% |
| Dec-13 | 78.6% | 20.9% | 44.2% |
| Jan-14 | 96.2% | 29.6% | 96.3% |
| Feb-14 | 107.3% | 37.7% | 87.8% |
| Mar-14 | 127.9% | 45.5% | 71.2% |
| Apr-14 | 103.1% | 48.8% | 46.3% |
| May-14 | 100.6% | 47.4% | 83.7% |
| Jun-14 | 86.2% | 43.1% | 91.0% |
| Jul-14 | 55.2% | 35.1% | 68.0% |
| Aug-14 | 38.8% | 21.9% | 60.6% |
| Sep-14 | 29.5% | 13.2% | 50.9% |
| Oct-14 | 25.6% | 5.7% | 29.1% |
| Nov-14 | 20.0% | 2.5% | 36.6% |
| Dec-14 | 18.0% | -1.8% | 32.2% |
| Jan-15 | 12.9% | -4.9% | 24.8% |
| Feb-15 | 15.8% | -8.4% | 13.9% |
| Mar-15 | 12.2% | -11.7% | 25.1% |
| Apr-15 | 7.6% | -13.2% | 26.0% |
| May-15 | 7.8% | -15.4% | -0.1% |
| Jun-15 | 4.3% | -16.4% | -10.0% |
| Jul-15 | 5.1% | -15.3% | -10.8% |
| Aug-15 | 3.5% | -13.7% | -14.9% |
| Sep-15 | -0.8% | -11.7% | -18.5% |
| Oct-15 | -7.1% | NA | NA |
Las Vegas Real Estate in October: Sales Increased 6% YoY, Inventory Down YoY
by Calculated Risk on 11/09/2015 08:01:00 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 Shows Stable is the New Normal
According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in October was 3,020, up from 2,861 one year ago. Compared to October 2014, 4.7 percent more homes and 9.2 percent more condos and townhomes sold this October. Lynam said local home sales in 2015 remain ahead of last year’s sales pace.There are several key trends that we've been following:
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 October, 6.7 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 10.6 percent one year ago. Another 7.5 percent of October sales were bank-owned, down from 8.9 percent one year ago.
...
By the end of October, GLVAR reported 8,252 single-family homes listed without any sort of offer. That’s down 7.1 percent from one year ago. For condos and townhomes, the 2,314 properties listed without offers in October represented a 9.2 percent decrease from one year ago.
emphasis added
1) Overall sales were up 5.6% year-over-year.
2) Conventional (equity, not distressed) sales were up 13% year-over-year. In Oct 2014, 80.5% of all sales were conventional equity. In Oct 2015, 85.8% were standard equity sales.
3) The percent of cash sales has declined year-over-year from 35.1% in Oct 2014 to 30.9% in Oct 2015. (investor buying appears to be declining).
4) Non-contingent inventory is down 7.1% year-over-year. This was the second 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 is over.
| Las Vegas: Year-over-year Change in Non-contingent Inventory | |
|---|---|
| Month | YoY |
| Jan-13 | -58.3% |
| Feb-13 | -53.4% |
| Mar-13 | -42.1% |
| Apr-13 | -24.1% |
| May-13 | -13.2% |
| Jun-13 | 3.7% |
| Jul-13 | 9.0% |
| Aug-13 | 41.1% |
| Sep-13 | 60.5% |
| Oct-13 | 73.4% |
| Nov-13 | 77.4% |
| Dec-13 | 78.6% |
| Jan-14 | 96.2% |
| Feb-14 | 107.3% |
| Mar-14 | 127.9% |
| Apr-14 | 103.1% |
| May-14 | 100.6% |
| Jun-14 | 86.2% |
| Jul-14 | 55.2% |
| Aug-14 | 38.8% |
| Sep-14 | 29.5% |
| Oct-14 | 25.6% |
| Nov-14 | 20.0% |
| Dec-14 | 18.0% |
| Jan-15 | 12.9% |
| Feb-15 | 15.8% |
| Mar-15 | 12.2% |
| Apr-15 | 7.6% |
| May-15 | 7.8% |
| Jun-15 | 4.3% |
| Jul-15 | 5.1% |
| Aug-15 | 3.5% |
| Sep-15 | -0.8% |
| Oct-15 | -7.1% |
Sunday, November 08, 2015
Sunday Night Futures
by Calculated Risk on 11/08/2015 07:54:00 PM
Goldman Sachs chief economist Jan Hatzius as quoted in Business Insider:
"The October employment report was solidly better-than-expected, and we now see a rate increase from the FOMC at the December meeting as very likely."More from Hatzius as quoted by Bloomberg's Matthew Boesler:
[Hatzius wrote] "our baseline view of the economy now implies a clear need for higher rates before long"Weekend:
• Schedule for Week of November 8, 2015
From CNBC: Pre-Market Data and Bloomberg futures: currently S&P futures and DOW futures are down slightly (fair value).
Oil prices were down over the last week with WTI futures at $44.37 per barrel and Brent at $47.48 per barrel. A year ago, WTI was at $78, and Brent was at $83 - so prices are down about 40% year-over-year (It was a year ago that prices were falling sharply).
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.21 per gallon (down over $0.70 per gallon from a year ago).
2016: Preliminary Housing Forecasts
by Calculated Risk on 11/08/2015 09:40:00 AM
Towards the end of each year I collect some housing forecasts for the following year, and it looks like analysts are optimistic for 2016 (many more forecasts will be added).
First a review of the previous three years ...
Here is a summary of forecasts for 2015. In 2015, new home sales will probably be just over 500 thousand, and total housing starts will be something over 1.1 million. It is early, but CoreLogic, Zillow and the MBA were very close on New Home sales, and CoreLogic, MetroStudy, MBA and Zillow were all close on starts.
Here is a summary of forecasts for 2014. In 2014, new home sales were 437 thousand, and total housing starts were 1.003 million. No one was close on New Home sales (all way too optimistic), and Michelle Meyer (Merrill Lynch) and Fannie Mae were the closest on housing starts (about 10% too high). In 2014, many analysts underestimated the impact of higher mortgage rates and higher new home prices on new home sales and starts.
Here is a summary of forecasts for 2013. In 2013, new home sales were 429 thousand, and total housing starts were 925 thousand. Barclays were the closest on New Home sales followed by David Crowe (NAHB). Fannie Mae and the NAHB were the closest on housing starts.
The table below shows a few forecasts for 2016 (I'll add many more of the next several weeks).
From Fannie Mae: Housing Forecast: October 2015
From NAHB: housing and economic forecast.
UCLA Ziman Center.
Note: For comparison, new home sales in 2015 will probably be just over 500 thousand, and total housing starts over 1.1 million.
I haven't worked up a forecast yet for 2016, however I think the NAHB forecast for new home sales is too high - as is the UCLA forecast for housing starts.
| Housing Forecasts for 2016 | ||||
|---|---|---|---|---|
| New Home Sales (000s) | Single Family Starts (000s) | Total Starts (000s) | House Prices1 | |
| Fannie Mae | 562 | 827 | 1,224 | 4.9%2 |
| NAHB | 642 | 877 | 1,255 | |
| UCLA Ziman Center | 1,420 | |||
| 1Case-Shiller unless indicated otherwise 2FHFA Purchase-Only Index | ||||
Saturday, November 07, 2015
Schedule for Week of November 8th
by Calculated Risk on 11/07/2015 08:11:00 AM
The key economic report this week is October retail sales on Friday.
10:00 AM ET: The Fed will release the monthly Labor Market Conditions Index (LMCI).
9:00 AM ET: NFIB Small Business Optimism Index for October.
10:00 AM: Monthly Wholesale Trade: Sales and Inventories for August. The consensus is for a 0.1% increase in inventories.
The Federal Government and Banks will be closed in observance of Veterans Day. The market will be open.
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 266 thousand initial claims, down from 276 thousand the previous week.
10:00 AM: Job Openings and Labor Turnover Survey for September from the BLS. This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.
Jobs openings decreased in August to 5.370 million from 5.668 million in July.
The number of job openings (yellow) were up 9% year-over-year, and Quits were up 9% year-over-year.
2:00 PM: The Monthly Treasury Budget Statement for October.
6:00 PM: Speech by Fed Vice Chairman Stanley Fischer, The Transmission of Exchange Rate Changes to Output and Inflation, At the Conference on Monetary Policy Implementation and Transmission in the Post-Crisis Period, Washington, D.C.
8:30 AM: The Producer Price Index for October from the BLS. The consensus is for a 0.2% increase in prices, and a 0.1% increase in core PPI.
8:30 AM ET: Retail sales for October will be released.This graph shows retail sales since 1992 through September 2015. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline). On a monthly basis, retail sales were up 0.1% from August to September (seasonally adjusted), and sales were up 2.4% from September 2014.
The consensus is for retail sales to increase 0.3% in October, and to increase 0.4% ex-autos.
10:00 AM: Manufacturing and Trade: Inventories and Sales (business inventories) report for September. The consensus is for no change in inventories.
10:00 AM: University of Michigan's Consumer sentiment index (preliminary for November). The consensus is for a reading of 92.0, up from 90.0 in October.
