by Calculated Risk on 12/31/2019 04:29:00 PM

CR Note: These lower population estimates are important for projections of economic growth and housing. I mentioned this slowdown in growth earlier this month in Is the Future still Bright?

From housing economist Tom Lawler: US Population Growth Slowed Again in 2019

Yesterday the Census Bureau released its “Vintage 2019” estimates of the US resident population, which showed that population growth in 2019 was the slowest (in numbers) since 1942 and the slowest in percentage growth since 1918. According to these estimates, the US resident population on July 1, 2019 was 328,239,523, just 1,552,022 (or 0.475%) higher than the downwardly-revised population estimate for July 1, 2018. 2009 was the third consecutive year that US population growth slowed significantly, reflecting lower births, higher deaths, and lower net international migration.

	Births	Deaths	Net International Migration	Total
2010-2016 (Yr. Avg.)	3,961,544	2,601,247	909,644	2,269,941
2016-2017	3,901,982	2,788,163	930,409	2,044,228
2017-2018	3,824,521	2,824,382	701,823	1,701,962
2018-2019	3,791,712	2,835,038	595,348	1,552,022

The latest population estimate for July 1, 2018 was 479,933 lower than the “Vintage 2018” estimate for that year, with the downward revision reflecting somewhat lower births, somewhat higher deaths, and significant lower net international migration. Population estimates for previous years of this decade were also revised downward modestly, mainly reflecting lower estimates for net international migration.

While updated estimates of the population by age won’t be available for several months, these latest estimates, if accurate, suggest that both total population growth and the growth in the working-age population were significantly slower over the past two years than previously thought.

For folks who use Census population projections to forecast other key variables, it is worth noting that the latest population estimate for 2019 is a sizable 1,965,493 lower than the estimate from the “Census 2017” projections, which are the latest available.

Updated population projections, originally slated for release in late October, are now scheduled to be released sometime in January. These estimates, however, will use the “Vintage 2018” estimates as a starting point, and as such are out of date before they are even released. Below is the latest from Census on the upcoming population projections release.

"The U.S. Census Bureau will be releasing several new and updated population projection reports that cover projected life expectancy by nativity, projected population by alternative migration scenarios and updated population projections by demographic characteristics. Supplemental data files for the alternative migration scenarios and input data sets for the main projections series are also being released."

by Calculated Risk on 12/31/2019 01:19:00 PM

CR Note: This is a repeat of earlier posts with updated graphs.

A few key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.
3) Even though distressed sales are down significantly, the seasonal factor is based on several years of data - and the factor is now overstating the seasonal change (second graph below).
4) Still the seasonal index is probably a better indicator of actual price movements than the Not Seasonally Adjusted (NSA) index.

For in depth description of these issues, see former Trulia chief economist Jed Kolko's article "Let’s Improve, Not Ignore, Seasonal Adjustment of Housing Data"

Note: I was one of several people to question the change in the seasonal factor (here is a post in 2009) - and this led to S&P Case-Shiller questioning the seasonal factor too (from April 2010).  I still use the seasonal factor (I think it is better than using the NSA data).

Click on graph for larger image.

This graph shows the month-to-month change in the NSA Case-Shiller National index since 1987 (through October 2019).   The seasonal pattern was smaller back in the '90s and early '00s, and increased once the bubble burst.

The seasonal swings have declined since the bubble.

The second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust.

The swings in the seasonal factors has started to decrease, and I expect that over the next several years - as recent history is included in the factors - the seasonal factors will move back towards more normal levels.

However, as Kolko noted, there will be a lag with the seasonal factor since it is based on several years of recent data.

by Calculated Risk on 12/31/2019 11:09:00 AM

Fannie Mae reported that the Single-Family Serious Delinquency decreased slightly to 0.66% in November, from 0.67% in October. The serious delinquency rate is down from 0.76% in November 2018.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". 

This is the the lowest serious delinquency rate for Fannie Mae since June 2007.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (2% of portfolio), 2.45% are seriously delinquent. For loans made in 2005 through 2008 (4% of portfolio), 4.08% are seriously delinquent, For recent loans, originated in 2009 through 2018 (94% of portfolio), only 0.34% are seriously delinquent. So Fannie is still working through a few poor performing loans from the bubble years.

I expect the serious delinquency rate will probably decline to 0.4 to 0.6 percent or so to a cycle bottom.

Note: Freddie Mac reported earlier.

by Calculated Risk on 12/31/2019 09:12:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3 month average of August, September and October prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

Note: Case-Shiller reports Not Seasonally Adjusted (NSA), I use the SA data for the graphs.

From S&P: S&P CoreLogic Case-Shiller Index Shows Annual Home Price Gains Increased In October

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.3% annual gain in October, up from 3.2% in the previous month. The 10-City Composite annual increase came in at 1.7%, up from 1.5% in the previous month. The 20-City Composite posted a 2.2% year-over-year gain, up from 2.1% in the previous month.

Phoenix, Tampa and Charlotte reported the highest year-over-year gains among the 20 cities. In October, Phoenix led the way with a 5.8% year-over-year price increase, followed by Tampa with a 4.9% increase and Charlotte with a 4.8% increase. Twelve of the 20 cities reported greater price increases in the year ending October 2019 versus the year ending September 2019.
...
The National Index, 10-City and 20-City Composites all posted a month-over-month increase of 0.1% before seasonal adjustment in October. After seasonal adjustment, the National Index recorded a 0.5% month-over-month increase in October while the 10-City and 20-City Composites both posted a 0.4% increase. In October, eight of 20 cities reported increases before seasonal adjustment while 18 of 20 cities reported increases after seasonal adjustment.

"October’s U.S. housing data continue to be reassuring,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “With October’s 3.3% increase in the national composite index, home prices are currently more than 15% above the pre-financial crisis peak reached July 2006. October’s results were broad-based, as both our 10- and 20-city composites rose. Of the 20 cities in the composite, only San Francisco saw a year-over-year price decline in October.
…
“As was the case last month, after a long period of decelerating price increases, the national, 10-city, and 20-city composites all rose at a modestly faster rate in October compared to September. This stability was broad-based, reflecting data in 12 of 20 cities. It is, of course, still too soon to say whether this marks an end to the deceleration or is merely a pause in the longer-term trend.”
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 1.7% from the bubble peak, and up 0.4% in October (SA) from September.

The Composite 20 index is 5.5% above the bubble peak, and up 0.4% (SA) in October.

The National index is 14.8% above the bubble peak (SA), and up 0.5% (SA) in October.  The National index is up 55.2% from the post-bubble low set in December 2011 (SA).

The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 1.7% compared to October 2018.  The Composite 20 SA is up 2.2% year-over-year.

The National index SA is up 3.3% year-over-year.

Note: According to the data, prices increased in 18 of 20 cities month-over-month seasonally adjusted.

I'll have more later.

by Calculated Risk on 12/30/2019 06:59:00 PM

Tuesday:
• At 9:00 AM ET, FHFA House Price Index for October 2019. This was originally a GSE only repeat sales, however there is also an expanded index.

• Also at 9:00 AM, S&P/Case-Shiller House Price Index for October. The consensus is for a 3.2% year-over-year increase in the National index for October.

by Calculated Risk on 12/30/2019 04:50:00 PM

Earlier I posted some questions for next year: Ten Economic Questions for 2020. I'm adding some thoughts, and maybe some predictions for each question.

4) Participation Rate: In November 2020, the overall participation rate was at 63.2%, up slightly year-over-year from 62.9% in November 2019.   The BLS is projecting the overall participation rate will decline to 61.2% by 2028.  Will the overall participation rate start declining in 2020, or will it move more sideways (or slightly up) in 2020?

The overall labor force participation rate is the percentage of the working age population (16 + years old) in the labor force.   A large portion of the decline in the participation rate since 2000 is due to demographics and long term trends.

Click on graph for larger image.

The Labor Force Participation Rate in November 2019 was at 63.2%, up from the cycle low of 62.4% in September 2015.

Some analysts were expecting the overall participation rate to recover to pre-recession levels (over 66%) but that analysis ignored demographics and long term trends.

Note: Due to demographics, I also follow the prime working age participation and employment population ratio.

In September, the BLS released their updated Labor Force projections through 2028. Their projections show the overall Labor Force Participation Rate (LFPR) declining to 61.2% in 2018 from the current level.  Although it is uncertain when the decline in the overall LFPR will begin, demographics suggest the LFPR will decline about 2 percentage points over the next decade.

It is possible that the participation rate will increase for other groups like prime working age women, but that is unclear - and those possible trend changes will probably be overwhelmed by the larger demographic trend.

This graph shows the average participation rate for prime working age cohort by five year groups (25 to 54 years old), and the next four older cohorts.

Note that the median person in the Boomer generation will be 66 in 2020, and that the youngest person will be in the 55 to 59 cohort - when the participation rate starts to decline.

Note: The participation rate for older age groups has been increasing over the last couple of decades, but that is far less significant than the number of people moving into the next age group.

All of the Baby Boom generation is now in age groups with significantly declining participation rates, and I expect this will start a downward trend for the overall participation rate over the next decade, even with a healthy job market.

So I expect the overall participation rate to decline in 2020 to just under 63% by the end of the year.

Here are the Ten Economic Questions for 2020 and a few predictions:

• Question #1 for 2020: How much will the economy grow in 2020?
• Question #2 for 2020: Will job creation in 2020 be as strong as in 2019?
• Question #3 for 2020: What will the unemployment rate be in December 2020?
• Question #4 for 2020: Will the overall participation rate start declining in 2020, or will it move more sideways (or slightly up) in 2020?
• Question #5 for 2020: How much will wages increase in 2020?
• Question #6 for 2020: Will the core inflation rate rise in 2020? Will too much inflation be a concern in 2020?
• Question #7 for 2020: Will the Fed cut or raise rates in 2020, and if so, by how much?
• Question #8 for 2020: How much will RI increase in 2020? How about housing starts and new home sales in 2020?
• Question #9 for 2020: What will happen with house prices in 2020?
• Question #10 for 2020: Will housing inventory increase or decrease in 2020?

by Calculated Risk on 12/30/2019 02:58:00 PM

Earlier from the Chicago PMI: Chicago Business Barometer™ – Rose to 48.9 in December

The Chicago Business BarometerTM, produced with MNI, rose 2.6 points in December, hitting a four-month high of 48.9.

Business sentiment dropped by 1.2 points to 46.2 in Q4, marking the lowest quarterly reading since Q2 2009. The index was below the 50-mark for the second successive quarter.
...
While Employment cooled to 47.4 in December, showing the largest monthly decline, it also scored the biggest quarterly gain, up by 11.1% to 48.9.
emphasis added

CR Note: "An indicator reading above 50 shows expansion compared with a month earlier while below 50 indicates contraction." This was another month of contraction.

by Calculated Risk on 12/30/2019 12:38:00 PM

Earlier I posted some questions for next year: Ten Economic Questions for 2020. I'm adding some thoughts, and maybe some predictions for each question.

5) Real Wage Growth: Wage growth was disappointing in 2019 (up 3.1% year-over-year as of November).  How much will wages increase in 2020?

The most followed wage indicator is the  “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report.

Click on graph for larger image.

Nominal wage growth (blue line) had been running close to 2% from 2010 through 2015 with a slight upward trend.

Then the pace of wage growth started to pickup in 2016.   However wage growth in 2019 was disappointing (only up 3.1% YoY in November).

However, with low inflation, workers was some real wage growth in 2019. The red line is real wage growth (adjusted using headline CPI). Real wages increased during the crisis because CPI declined sharply. CPI was very low in 2015 - due to the decline in oil prices - so real wage growth picked up in 2015.

There are two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. All three data series are different, and most of the focus recently has been the CES series (used in the graph above).

The second graph is from the Atlanta Fed Wage Tracker.   This measure is the year-over-year change in nominal wages for individuals.

By following wage changes for individuals, this removes the demographic composition effects (older workers who are retiring tend to be higher paid, and younger workers just entering the workforce tend to be lower paid).

The Atlanta Fed Wage tracker showed nominal wage growth close to 4% in late 2016, but dipped in 2017.   At the end of 2018, wage growth was back up to close to 4% - and at 3.7% in November 2019.

Note: Economist Ernie Tedeschi has an excellent discussion on Twitter using the Atlanta Fed Wage Tracker, and breaking it down by quantile. The bottom quantile is seeing the fastest wage growth, possibly suggesting some pickup in wages in 2020.

As the labor market continues to tighten, we should see more wage pressure as companies have to compete for employees. I expect to see some further increases in both the Average hourly earning from the CES, and in the Atlanta Fed Wage Tracker.  Perhaps nominal wages will increase to the mid 3% range in 2020 according to the CES.

Here are the Ten Economic Questions for 2020 and a few predictions:

• Question #1 for 2020: How much will the economy grow in 2020?
• Question #2 for 2020: Will job creation in 2020 be as strong as in 2019?
• Question #3 for 2020: What will the unemployment rate be in December 2020?
• Question #4 for 2020: Will the overall participation rate start declining in 2020, or will it move more sideways (or slightly up) in 2020?
• Question #5 for 2020: How much will wages increase in 2020?
• Question #6 for 2020: Will the core inflation rate rise in 2020? Will too much inflation be a concern in 2020?
• Question #7 for 2020: Will the Fed cut or raise rates in 2020, and if so, by how much?
• Question #8 for 2020: How much will RI increase in 2020? How about housing starts and new home sales in 2020?
• Question #9 for 2020: What will happen with house prices in 2020?
• Question #10 for 2020: Will housing inventory increase or decrease in 2020?

by Calculated Risk on 12/30/2019 10:36:00 AM

From the Dallas Fed: Texas Manufacturing Activity Expands Modestly

Growth in Texas factory activity resumed in December, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rebounded to 3.6 after dipping into negative territory last month.

Most other measures of manufacturing activity also rebounded in December. The new orders index rose from -3.0 to 1.6. The growth rate of orders index moved up but remained in negative territory for a third consecutive month, coming in at -5.0. The capacity utilization index shot up 13 points to 7.8, and the shipments index rose from -4.5 to 3.0.

Perceptions of broader business conditions were mixed in December. The general business activity index remained slightly negative at -3.2, while the company outlook index inched up three points to 1.3. Both indexes have oscillated between positive (expansionary) and negative (contractionary) territory this year. The index measuring uncertainty regarding companies’ outlooks receded 12 points to 5.6, its lowest reading since March.

Labor market measures suggested rising employment levels and slightly longer workweeks this month. The employment index rose from 0.9 to 6.2, indicative of a pickup in hiring.
emphasis added

This was the last of the regional Fed surveys for December.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through December), and five Fed surveys are averaged (blue, through December) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through November (right axis).

Based on these regional surveys, it seems likely the ISM manufacturing index for December will be weak again.

by Calculated Risk on 12/30/2019 10:03:00 AM

From the NAR: Pending Home Sales Expand 1.2% in November

Pending home sales increased in November, rebounding from the prior month’s decline, according to the National Association of Realtors®. The West region reported the highest growth last month, while the other three major U.S. regions saw only marginal variances in month-over-month contract activity. Pending home sales were up nationally and up in all regions compared to one year ago.

The Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, rose 1.2% to 108.5 in November. Year-over-year contract signings jumped 7.4%. An index of 100 is equal to the level of contract activity in 2001.
...
he regional indices had mixed results in November. The Northeast PHSI slid 0.1% to 96.3 in November, 2.6% higher than a year ago. In the Midwest, the index rose 1.0% to 102.5 last month, 5.0% higher than in November 2018.

Pending home sales in the South decreased 0.2% to an index of 125.0 in November, a 7.7% increase from last November. The index in the West grew 5.5% in November 2019 to 98.4, an increase of 14.0% from a year ago.
emphasis added

This was close to expectations for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in December and January.