by Calculated Risk on 12/13/2020 07:31:00 PM

Note: The week-over-week growth in positive cases has slowed.  Hopefully that continues.

I'm looking forward to not posting this data in a few months. Please stay healthy!

The US is now averaging well over 1 million tests per day. Based on the experience of other countries, for adequate test-and-trace (and isolation) to reduce infections, the percent positive needs to be under 5% (probably close to 1%), so the US has far too many daily cases - and percent positive - to do effective test-and-trace.

There were 1,397,965 test results reported over the last 24 hours.

There were 186,884 positive tests.

Over 31,000 US deaths have been reported so far in December. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 13.3% (red line is 7 day average).  The percent positive is calculated by dividing positive results by the sum of negative and positive results (I don't include pending).

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported and daily hospitalizations.

Note that there were very few tests available in March and April, and many cases were missed, so the hospitalizations was higher relative to the 7-day average of positive tests in July.

• Record Hospitalizations (Over 109,000)

• Record 7 Day Average Cases

• Record 7 Day Average Deaths

by Calculated Risk on 12/13/2020 10:13:00 AM

Expectations are there will be no change to rate policy when the FOMC meets on Tuesday and Wednesday this week.

Here are some comments from Goldman Sachs economists David Mericle and Laura Nicolae:

"Fed officials are likely to see larger near-term risks but a brighter medium-term outlook as they head into their December meeting next week. The winter virus resurgence has grown much worse since the last meeting, but the vaccine news should inspire more confidence in 2021 recovery prospects than when Fed officials last wrote down projections in September.

We expect this brighter outlook to translate to slightly rosier economic projections including a 2021 growth forecast of just over 4% ... We also expect a somewhat lower unemployment rate path, but no changes to the inflation projections beyond this year.
...
Markets will be most focused on possible changes to the Fed’s asset purchase policy next week. The minutes to the November meeting indicate that the FOMC discussed both forward guidance for asset purchases and possible changes to the composition or size of asset purchases.
emphasis added

For review, here are the September FOMC projections.

Note that GDP decreased at a 5.0% annual rate in Q1, decreased at a 31.4% annual rate in Q2, and increased at 33.1% annual rate in Q3. This leaves real GDP down 3.5% from Q4 2019.

Wall Street forecasts are for GDP to increase at a 5% to 6% annual rate in Q4.  These forecasts would put the economy down around 2.1% to 2.3% Q4-over-Q4.  That would be above the high end of their September forecast. 

The course of the economy will depend on the course of the pandemic, so the FOMC has to factor in their expectations of the impact of the current surge of the pandemic - and when the pandemic will subside and end (likely sometime in mid-2021 with the vaccine).  The FOMC also has to factor in further disaster relief, and that is still unknown.

It is likely that GDP forecasts for 2020 will be revised up, and also for 2021.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2020	2021	2022	2023
Sept 2020	-4.0 to -3.0	3.6 to 4.7	2.5 to 3.3	2.4 to 3.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 6.7% in November, down from 6.9% in October, and might decrease more in December.  This will put the unemployment rate for Q4 below the lower end of the September projections.   

So the unemployment rate for Q4 2020 will be revised down.

Note that the unemployment rate doesn't remotely capture the economic damage to the labor market.  Not only are there 10.7 million people unemployed, and 4.1 million people have left the labor force since January.  And millions more are being supported by various provisions of the CARES Act - that still hasn't been renewed and is schedule to expire on December 26th.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2020	2021	2022	2023
Sept 2020	7.0 to 8.0	5.0 to 6.2	4.0 to 5.0	3.5 to 4.4

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of October 2020, PCE inflation was up 1.2% from October 2019. This was in the middle of the September projections for Q4.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2020	2021	2022	2023
Sept 2020	1.1 to 1.3	1.6 to 1.9	1.7 to 1.9	1.9 to 2.0

PCE core inflation was up 1.4% in October year-over-year.  This was also in the middle of the September projections for Q4.  Note that inflation will not be a concern for the FOMC for the foreseeable future.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2020	2021	2022	2023
Sept 2020	1.3 to 1.5	1.6 to 1.8	1.7 to 1.9	1.9 to 2.0

by Calculated Risk on 12/12/2020 07:55:00 PM

I'm looking forward to not posting this data in a few months. Please stay healthy!

The US is now averaging well over 1 million tests per day. Based on the experience of other countries, for adequate test-and-trace (and isolation) to reduce infections, the percent positive needs to be under 5% (probably close to 1%), so the US has far too many daily cases - and percent positive - to do effective test-and-trace.

There were 1,497,861 test results reported over the last 24 hours.

There were 223,365 positive tests.

Almost 30,000 US deaths have been reported so far in December. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 14.9% (red line is 7 day average).  The percent positive is calculated by dividing positive results by the sum of negative and positive results (I don't include pending).

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported and daily hospitalizations.

Note that there were very few tests available in March and April, and many cases were missed, so the hospitalizations was higher relative to the 7-day average of positive tests in July.

• Record Hospitalizations (Over 108,000)

• Record 7 Day Average Cases

• Tied Yesterday for record 7 Day Average Deaths

by Calculated Risk on 12/12/2020 08:11:00 AM

The key economic reports this week are November Retail Sales and Housing Starts.

For manufacturing, November Industrial Production, and the December New York, Philly and Kansas City Fed surveys, will be released this week.

The FOMC meets this week, and no change to rate policy is expected.

----- Monday, Dec 14th -----
No major economic releases scheduled.

----- Tuesday, Dec 15th -----
8:30 AM: The New York Fed Empire State manufacturing survey for December. The consensus is for a reading of 6.8, up from 6.3.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for November.

This graph shows industrial production since 1967.

The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 72.9%.

----- Wednesday, Dec 16th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM ET: Retail sales for November will be released.  The consensus is for a 0.3% decrease in retail sales.

This graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993. Retail and Food service sales, ex-gasoline, increased by 7.1% on a YoY basis.

10:00 AM: The December NAHB homebuilder survey. The consensus is for a reading of  88, down from 90. Any number above 50 indicates that more builders view sales conditions as good than poor.

During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).

2:00 PM: FOMC Meeting Announcement. No change to rate policy is expected at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, Dec 17th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 815,000 initial claims, down from 853,000 last week.

8:30 AM: Housing Starts for November.

This graph shows single and total housing starts since 1968.

The consensus is for 1.530 million SAAR, unchanged from 1.530 million SAAR.

8:30 AM: the Philly Fed manufacturing survey for December. The consensus is for a reading of 19.0, down from 26.3.

11:00 AM: the Kansas City Fed manufacturing survey for December.

----- Friday, Dec 18th -----
10:00 AM: State Employment and Unemployment (Monthly) for November

4:30 PM: the Federal Reserve is expected to release the Bank Stress Test Results

by Calculated Risk on 12/11/2020 07:08:00 PM

I'm looking forward to not posting this data in a few months. Please stay healthy!

The US is now averaging well over 1 million tests per day. Based on the experience of other countries, for adequate test-and-trace (and isolation) to reduce infections, the percent positive needs to be under 5% (probably close to 1%), so the US has far too many daily cases - and percent positive - to do effective test-and-trace.

There were 1,682,010 test results reported over the last 24 hours.

There were 232,105 positive tests.

Over 27,000 US deaths have been reported so far in December. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 13.8% (red line is 7 day average).  The percent positive is calculated by dividing positive results by the sum of negative and positive results (I don't include pending).

And check out COVID Exit Strategy to see how each state is doing.

The second graph shows the 7 day average of positive tests reported and daily hospitalizations.

Note that there were very few tests available in March and April, and many cases were missed, so the hospitalizations was higher relative to the 7-day average of positive tests in July.

• Record Hospitalizations (Over 108,000)

• Record 7 Day Average Cases

• Record 7 Day Average Deaths

by Calculated Risk on 12/11/2020 03:30:00 PM

Note that November sales are for contracts typically signed in September and October.

From SacRealtor.org: November sales volume up 21% over 2019, demand remains

November ended with 1,511 sales, down 9.8% from the 1,676 sales in October. Compared to one year ago (1,242), the current figure is up 21.7%.
...
The Active Listing Inventory decreased 9.8% from October to November, from 1,253 units to 959 units. Compared with November 2019 (2,803), inventory is down 46.8%. The Months of Inventory dropped from .7 Months to .6 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.
...
The Median DOM (days on market) increased from 6 to 7 and the Average DOM increased from 15 to 16. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.” Of the 1,511 sales this month, 86.2% (1,302) were on the market for 30 days or less and 95.1% (1,436) were on the market for 60 days or less.
emphasis added

by Calculated Risk on 12/11/2020 01:15:00 PM

From the HAR: Houston Housing Blazes its Way Through November

Homes across the greater Houston area continued selling at a record pace despite historically low inventory, the start of the holiday season and the lingering coronavirus pandemic. A low supply of homes for sale and strong demand from homebuyers combined to push the average price to record territory. Once again, the high end of the market generated the strongest increase in consumer activity with mid-range homes also selling briskly.

According to the latest Houston Association of Realtors (HAR) Market Update, 7,990 single-family homes sold in November compared to 6,359 a year earlier. That translates to a 25.6 percent increase and marks the sixth straight month of positive sales.
...
Sales of all property types totaled 9,660 – up 28.1 percent from November 2019. Total dollar volume for the month rose 43.9 percent to $3.1 billion. The lease market recorded an 11.1 percent decline in single-family housing while townhouse/condo leases fell 4.0 percent.

“In my 50 years in the real estate business, I have never seen a market defy supply and seasonality the way Houston has – amid a pandemic, no less,” said HAR Chairman John Nugent with RE/MAX Space Center. “It’s quite extraordinary to watch consumers take advantage of historically low interest rates and be able to choose their dream homes from among the tightest housing inventory this market has ever experienced.”
emphasis added

Inventory declined 27.0% year-over-year from 41,022 in November 2019 to 29,948 in November 2020.

Note that the closed sales in November were for contracts that were mostly signed in September and October.

by Calculated Risk on 12/11/2020 11:34:00 AM

Economic activity in the fourth quarter is dependent on the impact of the pandemic. With the number of new cases per day of COVID over 200,000, hospitalizations at record levels (over 100,000), and deaths per day at new record highs (over 3,000 the last two days), it is clear that economic activity will slow in December.  Most of the slowdown will be related to individuals being more cautious, and some will be related to government actions. 

Initial unemployment claims for last week showed a sharp increase to 853,000, suggesting that layoffs are increasing.  The current week is the BLS reference week for December, and with the new restrictions on activity, it seems likely there will be another sharp increase in layoffs this week (reported next Thursday).  

However, economic activity was solid in October, and that would suggest PCE growth of close to 6% in Q4, even if November and December see no month-over-month growth.  No one expects a lockdown like at the end of March and in April, but it is possible that activity slowed in November and will decline in December.

From Goldman Sachs:

We left our Q4 GDP tracking estimate unchanged at +5.0% (qoq ar) [Dec 9 estimate]

From Merrill Lynch:

We continue to track 33.1% for 3Q GDP and 6.0% for 4Q GDP. [Dec 11 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.5% for 2020:Q4 and 5.9% for 2021:Q1. [Dec 11 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2020 is 11.2 percent on December 9, unchanged from December 4 after rounding. [Dec 9 estimate]

by Calculated Risk on 12/11/2020 09:31:00 AM

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 yesterday) 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 2020, the Net Equity Extraction was $100 billion, or a 2.26% of Disposable Personal Income (DPI) .   This is the highest level of MEW since 2007, but nothing like the amount of equity extraction during the housing bubble (as a percent of 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.

The Fed's Flow of Funds report showed that the amount of mortgage debt outstanding increased by $158 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.

by Calculated Risk on 12/11/2020 08:43:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of December 8th.

From Black Knight: New Forbearance Starts Increase as Overall Volumes See First Monthly Rise Since Early June

In the past week, our McDash Flash Forbearance Tracker found that forbearance volumes in the U.S. edged lower (-12,000), including an improvement of 13,000 among portfolio/PLS loans in forbearance and 2,000 among GSE loans. These improvements were partially offset by a rise of 3,000 among FHA/VA forbearance plans.

As of Dec. 8, 5.2% (2.75 million) of all mortgages were in active forbearance, including 3.5% of GSE loans, 9.3% of FHA/VA loans, and 5.1% of PLS/portfolio loans.
...
Click on graph for larger image.

Despite the marginal weekly improvement, forbearance volumes are now up 21,000 month-over-month, marking the first monthly increase since the onset of the recovery in late May/early June. This increase is due in part to limited forbearance expiration activity in November, which has resulted in reduced forbearance removal activity in early December compared to previous months.

More noticeably – and potentially concerning – is the fact that forbearance plan starts have begun to trend upward. There were more than 40,000 first-time starts over the past week, representing homeowners who had not yet been in a COVID-19 forbearance plan, the highest such number of first-time starts since the beginning of September.

The increase suggests that rising COVID-19 case rates and measures undertaken to try to control the spread may be contributing to an increased need for forbearance assistance. New starts are now up 19% over the past two weeks, while overall starts (including restarts) are up 5% over the same period.

Black Knight will keep a close eye on this trend, which – should it continue – could alter expectations about the length of recovery.
emphasis added