by Calculated Risk on 4/17/2020 11:16:00 AM

Note: The NY Fed Nowcast and Atlanta Fed GDPNow models are based on released data and aren't capturing the collapse in the economy in the 2nd half of March. All forecasts, including the Merrill Lynch and other forecasts, are for the seasonally adjust annual rate (SAAR) of decline.

From Merrill Lynch:

We are tracking a 7% decline in 1Q. [SAAR Apr 17 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at -0.4% for 2020:Q1 and -7.9% for 2020:Q2. [Apr 17 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2020 is -0.3 percent on April 16 … There are no subjective adjustments made to GDPNow—the estimate is based solely on the mathematical results of the model. In particular, it does not capture the impact of COVID-19 beyond its impact on GDP source data and relevant economic reports that have already been released. It does not anticipate the impact of COVID-19 on forthcoming economic reports beyond the standard internal dynamics of the model. [Apr 16 estimate]

CR Note: It appears GDP declined around 7% SAAR in Q1. The decline in Q2 will be much larger.

by Calculated Risk on 4/17/2020 11:07:00 AM

The Northwest Multiple Listing Service reported Northwest MLS report for March shows initial disruptions from coronavirus pandemi

Like many sectors of the economy, residential real estate is experiencing disruption and uncertainty just when the vigorous spring market was ramping up. Not surprisingly, the March activity report from Northwest Multiple Listing Service, which covers 23 counties across Washington state, was mixed as guidelines affecting how brokers conduct business evolved.
...
“We expect that all numbers will decline in April and May as a direct result of the governor’s “Stay Home” order that became effective on March 26,” stated Mike Grady, president and COO at Coldwell Banker Bain. He also expects April and May will be “bridge months” before the market returns to a “more normal” activity level, “assuming we all abide by Governor Jay Inslee’s directives.”

Windermere Chief Economist Matthew Gardner described the numbers for March as “essentially irrelevant given the fact that the economy went into freefall during the month.” He also noted that for a period, real estate was not considered to be an essential service, which he said “suggests that April’s numbers will also not be an accurate representation of the market.”
emphasis added

There were 6,735 sales in March 2020, down slightly from 6,750 sales in March 2019.

The press release is for the Northwest. In King County, sales were down 0.2% year-over-year, and active inventory was down 21.6% year-over-year.

In Seattle, sales were up 17.6% year-over-year, and inventory was down 30.1% year-over-year..  This puts the months-of-supply in Seattle at just 1.2 months.

The closed sales are for contracts mostly signed in January and February.   There will be a significant decline in sales in coming months.

by Calculated Risk on 4/17/2020 10:14:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were higher in March in 29 states and the District of Columbia, lower in 3 states, and stable in 18 states, the U.S. Bureau of Labor Statistics reported today. Twenty-three states had jobless rate increases from a year earlier, 3 states had decreases, and 24 states and the District had little or no change. The national unemployment rate rose by 0.9 percentage point over the month to 4.4 percent and was 0.6 point higher than in March 2019
...
North Dakota had the lowest unemployment rate in March, 2.2 percent, while Louisiana had the highest rate, 6.9 percent. The rates in Alaska (5.6 percent) and Idaho (2.6 percent) set new series lows. (All state series begin in 1976.)
emphasis added

Click on graph for larger image.

This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 1976.

At the worst of the great recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently 4 states and D.C. have an unemployment rate at or above 6% (dark blue).  These are D.C., Louisiana, Nevada, Pennsylvania, and West Virginia.

A total of five states are at a series low: Alaska, Idaho, Maryland, North Dakota and Oregon.

In April, most, if not all, states will have unemployment rates well above 10%.

by Calculated Risk on 4/17/2020 08:44:00 AM

The Arizona Regional Multiple Listing Service (ARMLS) reports ("Stats Report"):

1) Overall sales were at 8,626 in March, up from 7,279 in February, and up from 8,344 in March 2019. Sales were up 18.5% from February 2020 (last month), and up 3.4% from March 2019.

2) Active inventory was at 14,257, down from 18,182 in March 2019. That is down 22% year-over-year.

3) Months of supply decreased to 2.11 in March from 2.14 months in February. This remains low.

This was another market with increasing sales and falling inventory.

Sales are reported at the close of escrow, so these sales were mostly signed in January and February. With the COVID-19 crisis, everything will change for the duration of the crisis. My guess is sales will decline significantly, and inventory will probably stay relatively low (no one wants strangers in their homes).

by Calculated Risk on 4/16/2020 05:53:00 PM

Test-and-trace is a key criterion in starting to reopen the country.   My current guess is test-and-trace will require around 300,000 tests per day at first since the US is far behind the curve.  Some scientists believe we need around 800,000 tests per day.

Note: The Financial Times reports that Germany is doing more than 50,000 tests per day (with about one-fourth of the US population). That would be 200,000 in the US.  I rounded up to 300,000 per day since the US is so behind on testing. But there are recommendations that Germany needs 200,000 tests per day to do test-and-trace.  (800,000 adjusted for population).

This is just test results reported daily.

There were 158,309 test results reported over the last 24 hours.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 19% (red line).  The US probably needs enough tests to push  the percentage below 5% (probably much lower based on testing in New Zealand).

All experts agree: We need many more tests!

by Calculated Risk on 4/16/2020 03:18:00 PM

The CAR reported: California’s housing market begins to feel effects of coronavirus as March home sales drop, C.A.R. reports

California home sales fell from both the previous month and year in March as the coronavirus pandemic began taking a toll on the housing market, especially in the last two weeks of the month as the state’s stay-at-home order was put in place, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 373,070 units in March, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2020 if sales maintained the March pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

March’s sales total was down 11.5 percent from the 421,670 level in February and was down 6.1 percent from a year ago. The month-to-month drop was the first double-digit loss in more than nine years and the largest since August 2007. Additionally, the year-over-year decline was the first in nine months and the largest decrease since March 2019.

“The relatively moderate sales decrease that occurred in March is only a prelude to what we’ll see in April and May because sales were still modestly strong during the first two weeks of March before stay-in-place orders were implemented throughout the state,” said 2020 C.A.R. President Jeanne Radsick, a second-generation REALTOR® from Bakersfield, Calif. “However, pending sales, which is a better reflection of the current market conditions and consumer concerns about the coronavirus, dropped nearly 25 percent and suggest the decline could extend beyond the next couple of months, depending on the duration of the pandemic and the lockdown.”
...
California’s supply of available housing decreased in March from the prior month as the COVID-19 pandemic continued to disrupt the economy and the housing market. Potential home sellers are holding off listing their properties on the market as uncertainty about the future economic/market conditions remains. C.A.R.’s Unsold Inventory Index dropped to 2.7 months in March, down from 3.6 months both in February and March 2019. It was the lowest inventory level in three months. The index indicates the number of months it would take to sell the supply of homes on the market at the current rate of sales.
emphasis added

CR Note: This is just the beginning of the sales decline. Existing home sales are reported when the transaction closes, so this was mostly for contracts signed in January and February. The CAR didn't include inventory, but it appears inventory is down sharply too (no one wants strangers walking through their homes right now).

by Calculated Risk on 4/16/2020 11:59:00 AM

From housing economist Tom Lawler:

Redfin Corporation, a real estate brokerage company in the United States and Canada, has recently (and temporarily) been publishing more timely data on selected housing data that it covers. Here is an excerpt from its website.

“Each week, we are temporarily releasing a new daily dataset to keep everyone up-to-date on the latest developments in the housing market.

All data here is computed daily as either a rolling 7-day or 28-day window. The local data is grouped by Redfin market, which may not align perfectly with metro area definitions (CBSAs). All of this data is subject to revisions weekly and should be viewed with caution.”

Here is a table showing YOY % changes in selected housing data compiled by Redfin.

Period	Pending Sales	YOY % Change Active Listings	New Listings
3/28-4/3/2020	-49.35%	-19.40%	-43.60%
3/21-3/27/2020	-33.81%	-17.40%	-28.30%
3/14-3/20/2020	-19.91%	-16.10%	-10.70%
3/7-3/13/2020	-7.31%	-15.90%	-3.50%
2/29-3/6/2020	1.46%	-16.30%	2.20%

Redfin data on closed home sales is not quite as timely, but for the 28-day period ending 3/27/2020 Redfin’s closed home sales were up 1.5% from the comparable period of 2019.

I have not done any work to assess how Redfin’s data track other measures of housing activity.

by Calculated Risk on 4/16/2020 11:50:00 AM

This was partially pre-crisis. Although housing starts will decline significantly during the crisis, residential construction is considered essential, and starts will not decline as sharply as some other sectors.

Earlier: Housing Starts decreased to 1.216 Million Annual Rate in March

Total housing starts in March were below expectations and revisions to prior months were negative.

The housing starts report showed starts were down 22.3% in March compared to February, but starts were still up 1.4% year-over-year compared to March 2019.

Single family starts were up 2.8% year-over-year, and multi-family starts were down 1.6% YoY.

This first graph shows the month to month comparison for total starts between 2019 (blue) and 2020 (red).

Click on graph for larger image.

Starts were up 1.4% in March compared to March 2019.

Last year, in 2019, starts picked up in the 2nd half of the year, so the comparisons are easy early in the year.

Starts will be down YoY over the next several months due to impact from COVID-19.

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 had picked up a little again lately.

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 once the crisis ends.

by Calculated Risk on 4/16/2020 09:07:00 AM

From the Philly Fed: Manufacturing firms reported continued weakening

Manufacturing firms reported continued weakening in regional manufacturing activity this month, according to results from the Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments once again fell sharply this month to long-term low readings, coinciding with ongoing developments related to the coronavirus pandemic. The indexes for employment and the average workweek, which had both remained positive last month, fell into negative territory this month. The firms expect the current letup in manufacturing activity to last less than six months, as the broadest indicator of future activity strengthened further from last month’s reading; furthermore, the firms continue to expect overall growth in new orders, shipments, and employment over the next six months.

The diffusion index for current activity declined strikingly for the second consecutive month from -12.7 in March to -56.6 this month, falling below its nadir during the Great Recession. This is the current activity index’s lowest reading since July 1980. … The firms reported widespread decreases in manufacturing employment this month, as the current employment index fell 51 points to -46.7, its lowest reading since March 2009. The average workweek index fell 55 points to -54.5, its lowest reading ever.
emphasis added

This was well below the consensus forecast. 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 April), and five Fed surveys are averaged (blue, through March) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through March (right axis).

These early reports suggest the ISM manufacturing index will decline significantly in April, likely to new lows.

by Calculated Risk on 4/16/2020 08:47:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in March were at a seasonally adjusted annual rate of 1,216,000. This is 22.3 percent below the revised February estimate of 1,564,000, but is 1.4 percent above the March 2019 rate of 1,199,000. Single‐family housing starts in March were at a rate of 856,000; this is 17.5 percent below the revised February figure of 1,037,000. The March rate for units in buildings with five units or more was 347,000.

Building Permits:
Privately‐owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,353,000. This is 6.8 percent below the revised February rate of 1,452,000, but is 5.0 percent above the March 2019 rate of 1,288,000. Single‐family authorizations in March were at a rate of 884,000; this is 12.0 percent below the revised February figure of 1,005,000. Authorizations of units in buildings with five units or more were at a rate of 423,000 in March.
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 down in March compared to February.   Multi-family starts were down 1.6% year-over-year in March.

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

Single-family starts (blue) decreased in March, and were up 2.8% 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 March were below expectations and revisions were negative.

Residential construction is considered an essential business, and might hold up better than some other sectors of the economy - but will still be negatively impacted by COVID-19.

I'll have more later …