by Calculated Risk on 5/09/2018 02:31:00 PM

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 new record highs.

However, in 2017, visitor traffic declined 1.7% compared to 2016, but was still 8% above the pre-recession peak.

Convention attendance set a new record in 2017, but is off to a sluggish start in 2018. 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). 

Convention attendance was down 7.5% in Q1 2018 compared to Q1 2017.

Visitor traffic was down 1.6% in Q1 2018 compared to Q1 2017.

Historically, declines in Las Vegas visitor traffic have been associated with economic weakness, so the sluggish start to 2018 is a little concerning for the Vegas area.

by Calculated Risk on 5/09/2018 10:39:00 AM

The first graph shows the unemployment rate by four levels of education (all groups are 25 years and older) through April 2018.

Unfortunately this data only goes back to 1992 and includes only two recessions (the stock / tech bust in 2001, and the housing bust/financial crisis). Clearly education matters with regards to the unemployment rate - and all four groups are generally trending down.

Click on graph for larger image.

Note: This says nothing about the quality of jobs - as an example, a college graduate working at minimum wage would be considered "employed".

This brings up an interesting question: What is the composition of the labor force by educational attainment, and how has that been changing over time?

Note: Thanks to Tim Duy, Economics Professor at the University of Oregon, and Josh Lehner, at the Oregon Office of Economic Analysis.

Here is some data on the U.S. labor force by educational attainment since 1992.

Currently, almost 57 million people in the U.S. labor force have a Bachelor's degree or higher.  This is 40.4% of the labor force, up from 26.2% in 1992.

This is the only category trending up.  "Some college" has been steady, and both "high school" and "less than high school" have been trending down.

Based on current trends, probably more than half the labor force will have at least a bachelor's degree sometime in the next decade (2020s).

Some thoughts: Since workers with bachelor's degrees typically have a lower unemployment rate, this is probably a factor in pushing down the overall unemployment rate over time.

Also, I'd guess more education would mean less labor turnover, and that education is a factor in fewer weekly claims (I haven't seen data on unemployment claims by education).

A more educated labor force is one of the reasons I remain optimistic about the future.

by Calculated Risk on 5/09/2018 07:00:00 AM

From the MBA: Mortgage Applications Slightly Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 0.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending May 4, 2018.

... The Refinance Index decreased 1 percent from the previous week to its lowest level since October 2008. The seasonally adjusted Purchase Index decreased 0.2 percent from one week earlier. The unadjusted Purchase Index increased 0.4 percent compared with the previous week and was 3 percent higher than the same week one year ago. ...

The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($453,100 or less) decreased to 4.78 percent from 4.80 percent, with points decreasing to 0.50 from 0.53 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

Refinance activity will not pick up significantly unless mortgage rates fall 50 bps or more from the recent level.



The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 3% year-over-year.

by Calculated Risk on 5/08/2018 06:35:00 PM

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, The Producer Price Index for April from the BLS. The consensus is a 0.3% increase in PPI, and a 0.2% increase in core PPI.

Four years ago, there were numerous "doom and gloom" stories about housing. I responded with What's Right with Housing? written on May 6, 2014. I wrote:

The first mistake these writers make is they are asking the wrong question. Of course housing is lagging the recovery because of the residual effects of the housing bust and financial crisis (this lag was predicted on this blog and elsewhere for years - it should not be a surprise).

The correct question is: What's right with housing? And there is plenty.
...
Housing is a slow moving market - and the recovery will not be smooth or fast with all the residual problems. But overall housing is clearly improving and the outlook remains positive for the next few years.

What has happened since?

Housing starts are up 32% from March 2014 to March 2018.

New home sales are up 69% from March 2014 to March 2018.

Existing home sales are up 20%.

House prices are up 22% (Case-Shiller National Index February 2014 to February 2018).

When I started this blog in 2005, I was very bearish on example.  (For example, see: Housing: Speculation is the Key written in April 2005)

Some day I'll be bearish again on housing, but not now.  Clearly those bearish on housing in 2014 were wrong.

by Calculated Risk on 5/08/2018 01:50:00 PM

Update: 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.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases. 

I don't have a crystal ball, but watching inventory helps understand the housing market.

The graph below shows the year-over-year change for non-contingent inventory in Las Vegas (through April), Phoenix and Sacramento (through March), and also total existing home inventory as reported by the NAR (also through March 2018).

Click on graph for larger image.

This shows the year-over-year change in inventory for Phoenix, Sacramento, and Las Vegas.  The black line if the year-over-year change in inventory as reported by the NAR.

Note that inventory in Sacramento was up 19% year-over-year in March (inventory was still very low), and has increased year-over-year for six consecutive months. 

Also note the inventory is still down 19.5% in Las Vegas (red), but the YoY decline has been getting smaller - and it is very possible that inventory will up year-over-year in Las Vegas later this year.

I'll try to add a few other markets.

Inventory is a key for the housing market, and I will be watching inventory for the impact of the new tax law and higher mortgage rates on housing.

by Calculated Risk on 5/08/2018 12:11:00 PM

This is a key distressed market to follow since Las Vegas saw the largest price decline, following the housing bubble, of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Southern Nevada home prices keep climbing while supply keeps shrinking; GLVAR housing statistics for April 2018

Local home prices kept climbing through April as the local housing supply continued contracting, according to a report released today by the Greater Las Vegas Association of REALTORS®(GLVAR).
...
The low supply may also be slowing down local home sales, which have been running roughly even with last year’s sales pace so far this year after increasing in recent years. The total number of existing local homes, condos and townhomes sold during April was 3,571. Compared to one year ago, April sales were up 0.4 percent for homes and up 4.5 percent for condos and townhomes.
...
By the end of April, GLVAR reported 3,816 single-family homes listed for sale without any sort of offer. That’s down 24.9 percent from one year ago. For condos and townhomes, the 790 properties listed without offers in April represented a 23.6 percent increase from one year ago.
...
Meanwhile, the number of so-called distressed sales continues to decline. GLVAR reported that short sales and foreclosures combined accounted for 2.5 percent of all existing local home sales in April, down from 8.4 percent of all sales one year ago.
emphasis added

1) Overall sales were up slightly year-over-year from 3,529 in April 2017 to 3,571 in April 2018.

2) Active inventory (single-family and condos) is down sharply from a year ago, from a total of 5,722 in April 2017 to 4,606 in April 2018. Note: Total inventory was down 19.5% year-over-year - a large decline - but the smallest year-over-year decline in inventory since November 2016.  

Watch inventory.  Last year, inventory declined almost 500 homes from March to April, this year inventory was up slightly from March to April.   The inventory decline might be nearing an end in Las Vegas (and elsewhere).

3) Fewer distressed sales.

by Calculated Risk on 5/08/2018 10:07:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings increased to 6.6 million on the last business day of March, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.4 million and 5.3 million, respectively. Within separations, the quits rate was little changed at 2.3 percent and the layoffs and discharges rate was unchanged at 1.1 percent. ...

The number of quits edged up to 3.3 million in March. The quits rate was 2.3 percent. The number of quits edged up for total private and was unchanged for government. Quits increased in other services (+71,000). The number of quits increased in the Midwest region.
emphasis added

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for March, the most recent employment report was for April.

Click on graph for larger image.


Note that hires (dark blue) and total separations (red and light blue columns stacked) are pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

Jobs openings increased in March to 6.550 million from 6.078 in February.

The number of job openings (yellow) are up 16.8% year-over-year.

Quits are up 6.3% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job openings are at the highest level since this series started, and quits are increasing year-over-year. This was a strong report.

by Calculated Risk on 5/08/2018 08:57:00 AM

From the National Federation of Independent Business (NFIB): April 2018 Report: Small Business Optimism Index

The Small Business Optimism Index sustained record-high levels increasing to 104.8 in April, driven by reports of improved profits, the highest in the NFIB Small Business Economic Trends Survey’s 45-year history. Additionally, the number of small businesses reporting poor sales fell to a near record low.
..
Reports of employment gains remain strong among small businesses ... Owners reported adding a net 0.28 workers per firm on average, the third highest reading since 2006 (down from 0.36 workers reported last month, the highest since 2006). ...

Fifty-seven percent reported hiring or trying to hire (up 4 points), but 50 percent (88 percent of those hiring or trying to hire) reported few or no qualified applicants for the positions they were trying to fill. Twenty-two percent of owners cited the difficulty of finding qualified workers as their Single Most Important Business Problem (up 1 point), exceeding the percentage citing taxes or regulations.
emphasis added

Click on graph for larger image.

This graph shows the small business optimism index since 1986.

The index increased to 104.8 in April.

Note: Usually small business owners complain about taxes and regulations.  However, during the recession, "poor sales" was the top problem.

Now the difficulty of finding qualified workers is the top problem.

by Calculated Risk on 5/07/2018 07:13:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Still Waiting to Make a Move

Mortgage rates have been exceptionally sideways for nearly 2 weeks now--this after hitting the highest levels in more than 4 years on April 25th. [30YR FIXED - 4.625%-4.75%]
emphasis added

Tuesday:
• At 3:15 AM ET, Panel Discussion, Fed Chair Jerome Powell, Watch Live Monetary Policy Influences on Global Financial Conditions and International Capital Flows, At the Swiss National Bank and International Monetary Fund High Level Conference on the International Monetary System, Zurich, Switzerland

• At 6:00 AM, NFIB Small Business Optimism Index for April.

• At 10:00 AM, Job Openings and Labor Turnover Survey for March from the BLS.

by Calculated Risk on 5/07/2018 03:52:00 PM

Note: This index is possibly a leading indicator for new non-residential Commercial Real Estate (CRE) investment, except manufacturing.

From Dodge Data Analytics: Dodge Momentum Index Moves Higher in April

The Dodge Momentum Index jumped 6.1% in April to 163.0 (2000=100) from the revised March reading of 153.7. The Momentum Index is a monthly measure of the first (or initial) report for nonresidential building projects in planning, which have been shown to lead construction spending for nonresidential buildings by a full year. Both components of the Momentum Index moved higher in April, with the commercial component up 6.3% and the institutional component up 5.8%. Over the last two months the commercial portion of the Momentum Index has posted the most aggressive growth, fueled by continued low vacancy rates for commercial buildings as well as the potential benefits from the tax cuts passed in December. The gains for the institutional component, while healthy, have been more moderate reflecting the ebb and flow of public funding for larger education and public building projects.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 163.0 in April, up from 143.7 in March.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year". This suggests further growth in 2018 and into 2019.