by Calculated Risk on 12/17/2019 11:59:00 AM

Earlier: Housing Starts increased to 1.365 Million Annual Rate in November

Total housing starts in November were above expectations and revisions to prior months were minor.

The housing starts report showed starts were up 3.2% in November compared to October, and starts were up 13.6% year-over-year compared to November 2018.

Single family starts were up 16.7% year-over-year, and multi-family starts were up 4.4% YoY.

This first graph shows the month to month comparison for total starts between 2018 (blue) and 2019 (red).

Click on graph for larger image.

Starts were up 13.6% in October compared to October 2018.

Year-to-date, starts are up 0.6% compared to the same period in 2018.

Last year, in 2018, starts were strong early in the year, and then fell off in the 2nd half - so the comparison will be easy in December.

My guess was starts would be down slightly year-over-year in 2019 compared to 2018, but nothing like the YoY declines we saw in February and March.  However, with the strong finish to the year, starts will be up in 2019 compared to 2018.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession - but turned down, and has moved sideways recently.  Completions (red line) had lagged behind - then completions caught up with starts- although starts are picking up a little again.

As I've been noting for several years, the significant growth in multi-family starts is behind us - multi-family starts peaked in June 2015 (at 510 thousand SAAR).

The second graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Note the relatively low level of single family starts and completions.  The "wide bottom" was what I was forecasting following the recession, and now I expect some further increases in single family starts and completions.

by Calculated Risk on 12/17/2019 10:05:00 AM

Notes: In October there were 7.267 million job openings, and, according to the October Employment report, there were 5.855 million unemployed. So, for the twentieth consecutive month, there were more job openings than people unemployed. Also note that the number of job openings has exceeded the number of hires since January 2015 (almost 5 years).

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings edged up to 7.3 million (+235,000) on the last business day of October, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and separations were little changed at 5.8 million and 5.6 million, respectively. Within separations, the quits rate was unchanged at 2.3 percent and the layoffs and discharges rate was little changed at 1.2 percent. ...

The number of quits was little changed in October at 3.5 million and the rate was unchanged at 2.3 percent. Quits increased in other services (+66,000) and educational services (+12,000). Quits decreased in retail trade (-63,000) and in durable goods manufacturing (-21,000).
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 October, the most recent employment report was for November.

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 October to 7.267 million from 7.032 million in September.

The number of job openings (yellow) are down 4% year-over-year.

Quits are up 1% year-over-year. These are voluntary separations. (see light blue columns at bottom of graph for trend for "quits").

Job openings remain at a high level, and quits are still increasing year-over-year. This was a solid report.

by Calculated Risk on 12/17/2019 09:22:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production and manufacturing production both rebounded 1.1 percent in November after declining in October. These sharp November increases were largely due to a bounceback in the output of motor vehicles and parts following the end of a strike at a major manufacturer. Excluding motor vehicles and parts, the indexes for total industrial production and for manufacturing moved up 0.5 percent and 0.3 percent, respectively. Mining production edged down 0.2 percent, while the output of utilities increased 2.9 percent.

At 109.7 percent of its 2012 average, total industrial production was 0.8 percent lower in November than it was a year earlier. Capacity utilization for the industrial sector increased 0.7 percentage point in November to 77.3 percent, a rate that is 2.5 percentage points below its long-run (1972–2018) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up 10.6 percentage points from the record low set in June 2009 (the series starts in 1967).

Capacity utilization at 77.3% is 2.5% below the average from 1972 to 2017 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 increased in November to  109.7. This is 26% above the recession low, and 4.1% above the pre-recession peak.

The change in industrial production and increase in capacity utilization were above consensus expectations.

by Calculated Risk on 12/17/2019 08:41:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in November were at a seasonally adjusted annual rate of 1,365,000. This is 3.2 percent above the revised October estimate of 1,323,000 and is 13.6 percent above the November 2018 rate of 1,202,000. Single‐family housing starts in November were at a rate of 938,000; this is 2.4 percent above the revised October figure of 916,000. The November rate for units in buildings with five units or more was 404,000.

Building Permits:
Privately‐owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,482,000. This is 1.4 percent above the revised October rate of 1,461,000 and is 11.1 percent above the November 2018 rate of 1,334,000. Single‐family authorizations in November were at a rate of 918,000; this is 0.8 percent (±1.3 percent)* above the revised October figure of 911,000. Authorizations of units in buildings with five units or more were at a rate of 524,000 in November.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (red, 2+ units) were up in November compared to October.   Multi-family starts were up 7.3% year-over-year in November.

Multi-family is volatile month-to-month, and  has been mostly moving sideways the last several years.

Single-family starts (blue) increased in November, and were up 16.7% year-over-year.

The second graph shows total and single unit starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then eventual recovery (but still historically low).

Total housing starts in November were above expectations and revisions were minor.

I'll have more later …

by Calculated Risk on 12/16/2019 07:41:00 PM

• At 8:30 AM ET, Housing Starts for November. The consensus is for 1.344 million SAAR, up from 1.314 million SAAR.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for October. The consensus is for a 0.8% increase in Industrial Production, and for Capacity Utilization to increase to 77.2%.

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

by Calculated Risk on 12/16/2019 12:07:00 PM

From SacRealtor.org: Sales, inventory drop for November

November closed with a 19.4% decrease in sales volume, dropping from 1,540 in October to 1,242 units this month. Compared to one year ago (1,304), the current figure is down 4.8%.
...
The Active Listing Inventory decreased from 2,301 to 1,803 units. The Months of Inventory remained at 1.5 Months. This figure represents the amount of time (in months) it would take for the current rate of sales to deplete the total active listing inventory. [Note: Compared to November 2018, inventory is down 33.6%] .
...
The Median DOM (days on market) increased from 14 to 15 and the Average DOM increased from 28 to 29. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.” Of the 1,242 sales this month, 68.2% (847) were on the market for 30 days or less and 86.1% (1,069) were on the market for 60 days or less.
emphasis added

1) Overall sales decreased to 1,242 in November, down from 1,304 in November 2018. Sales were down 19.4% from October 2019 (previous month), and down 4.8% from November 2018.

2) Active inventory was at 1,803, down from 2,714 in November 2018. That is down 33.6% year-over-year.  This is the seventh consecutive month with a YoY decline following 20 months of YoY increases in inventory.

by Calculated Risk on 12/16/2019 10:08:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 76, up from 71 in November. Any number above 50 indicates that more builders view sales conditions as good than poor.

From NAHB: Builder Confidence Ends Year Strong on Solid Economic Fundamentals

Builder confidence in the market for newly-built single-family homes increased five points to 76 in December off an upwardly revised November reading, according to the latest National Association of Home Builders/Wells Fargo Housing Market Index (HMI) released today. This is the highest reading since June of 1999.

“Builders are continuing to see the housing rebound that began in the spring, supported by a low supply of existing homes, low mortgage rates and a strong labor market,” said NAHB Chairman Greg Ugalde, a home builder and developer from Torrington, Conn.

“While we are seeing near-term positive market conditions with a 50-year low for the unemployment rate and increased wage growth, we are still underbuilding due to supply-side constraints like labor and land availability,” said NAHB Chief Economist Robert Dietz. “Higher development costs are hurting affordability and dampening more robust construction growth.”
…
All three HMI components registered gains in December. The HMI index gauging current sales conditions rose seven points to 84, the component measuring sales expectations in the next six months edged up one point to 79 and the measure charting traffic of prospective buyers increased four points to 58.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell two points to 61, the Midwest increased five points to 63, the South moved one point higher to 76 and the West rose three points to 84.
emphasis added

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was well above the consensus forecast.

by Calculated Risk on 12/16/2019 08:34:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity was little changed in New York State, according to firms responding to the December 2019 Empire State Manufacturing Survey. The headline general business conditions index held steady at 3.5. New orders were also little changed, while shipments grew modestly.
...
The index for number of employees was unchanged at 10.4, indicating that employment expanded for the fourth consecutive month. The average workweek index was 0.8, a sign that the average workweek was unchanged.
…
Indexes assessing the six-month outlook suggested that optimism about future conditions improved for a second consecutive month.
emphasis added

This was slightly lower than the consensus forecast.

by Calculated Risk on 12/15/2019 07:45:00 PM

Weekend:
• Schedule for Week of December 15, 2019

• Mortgage Equity Withdrawal Positive in Q3

Monday:
• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for December. The consensus is for a reading of 4.0, up from 2.9.

• At 10:00 AM, The December NAHB homebuilder survey. The consensus is for a reading of  70, unchanged from 70. Any number above 50 indicates that more builders view sales conditions as good than poor.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are up 7, and DOW futures are up 37 (fair value).

Oil prices were up over the last week with WTI futures at $59.78 per barrel and Brent at $64.90 barrel.  A year ago, WTI was at $51, and Brent was at $59 - so oil prices are up 10% to 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.55 per gallon. A year ago prices were at $2.36 per gallon, so gasoline prices are up 19 cents year-over-year.

by Calculated Risk on 12/15/2019 12:27:00 PM

Note: This is not Mortgage Equity Withdrawal (MEW) data from the Fed. The last MEW data from Fed economist Dr. Kennedy was for Q4 2008.

The following data is calculated from the Fed's Flow of Funds data (released last week) and the BEA supplement data on single family structure investment. This is an aggregate number, and is a combination of homeowners extracting equity - hence the name "MEW" - and normal principal payments and debt cancellation (modifications, short sales, and foreclosures).

For Q3 2019, the Net Equity Extraction was $31 billion, or a 0.75% of Disposable Personal Income (DPI) .

Click on graph for larger image.

This graph shows the net equity extraction, or mortgage equity withdrawal (MEW), results, using the Flow of Funds (and BEA data) compared to the Kennedy-Greenspan method.

Note: This data is impacted by debt cancellation and foreclosures, but much less than a few years ago.

MEW has been mostly positive for the last four years. With a slower rate of debt cancellation, MEW will likely be mostly positive going forward - but nothing like during the housing bubble.

The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $85 billion in Q3.

For reference:

Dr. James Kennedy also has a simple method for calculating equity extraction: "A Simple Method for Estimating Gross Equity Extracted from Housing Wealth". Here is a companion spread sheet (the above uses my simple method).

For those interested in the last Kennedy data included in the graph, the spreadsheet from the Fed is available here.