by Calculated Risk on 12/18/2020 12:56:00 PM

There are a wide range of estimates, especially on house prices in 2021, with price forecasts ranging from increases of 2% to 10%.  These forecasts use different measures, but that is a very wide spread.

The key in 2021 will be inventory.  If inventory stays extremely low, there will be more housing starts and a larger increase in prices.  However, if inventory increases significantly, there will be fewer starts and less price appreciation. 

Towards the end of each year I collect some housing forecasts for the following year.

The table below shows a few forecasts for 2021:

From Fannie Mae: Housing Forecast: December 2020

From Freddie Mac: Freddie Mac Quarterly Forecast: Housing Market Continues to Rebound as Mortgage Rates Hover at Record Lows

From NAHB: Housing and Interest Rate Forecast, 12/8/2020

From NAR: 2020 Real Estate Forecast Summit

From Wells Fargo: 2021 Annual Economic Outlook

Note: For comparison, new home sales in 2020 will probably be around 845 thousand, and total housing starts around 1.375 million.

Housing Forecasts for 2021
	New Home Sales (000s)	Single Family Starts (000s)	Total Starts (000s)	House Prices1
Fannie Mae	872	1,107	1,444	2.1%2
Freddie Mac				2.6%2
Goldman Sachs	736		1,440	3.7%
MBA	960	1,121	1,473	2.0%2
Merrill Lynch	950		1,500	4.0%
NAHB	884	1,034	1,383
NAR			1,500	8.0%3
Wells Fargo			1,440
Zillow				10.3%4
1Case-Shiller unless indicated otherwise 2FHFA Purchase-Only Index 3NAR Median Prices 4Zillow HPI

by Calculated Risk on 12/18/2020 11:18:00 AM

Economic activity in the fourth quarter is dependent on the impact of the pandemic. With the number of new cases of COVID over 200,000 per day, hospitalizations at record levels (over 104,000), and deaths per day at new record highs (almost 3,500 each of the last two days), it appears that economic activity has slowed in December.   

Initial unemployment claims have increased sharply over the last two weeks, suggesting that layoffs have increased.  Last week was the BLS reference week for December, and the increase in weekly claims suggest a weak employment report for December.  

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.  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 17 estimate]

From Merrill Lynch:

We revise up our 4Q20 GDP forecast to 5.0% qoq saar from 4.0% previously, marking to market with our latest tracking estimate. This lifts our 2021 annual forecast by a tenth to 4.6% while 2020 remains at -3.5%. [Dec 18 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.4% for 2020:Q4 and 5.6% for 2021:Q1. A negative surprise from retail sales data more than offset positive news from housing sector data in both quarters. [Dec 18 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 11.1 percent on December 17, up from 11.0 percent on December 16. After this morning's housing starts report from the U.S. Census Bureau, the nowcast of fourth-quarter real residential investment growth increased from 31.0 percent to 33.1 percent. [Dec 17 estimate]

by Calculated Risk on 12/18/2020 10:06:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in November in 25 states and the District of Columbia, higher in 7 states, and stable in 18 states, the U.S. Bureau of Labor Statistics reported today. Forty-eight states and the District had jobless rate increases from a year earlier and two states had little change. The national unemployment rate edged down by 0.2 percentage point over the month to 6.7 percent but was 3.2 points higher than in November 2019.

Nonfarm payroll employment increased in 17 states, decreased in 3 states, and was essentially unchanged in 30 states and the District of Columbia in November 2020. Over the year, nonfarm payroll employment decreased in 48 states and the District and was essentially unchanged in 2 states.
...
Three states had unemployment rates above 10.0 percent in November: New Jersey at 10.2 percent and Hawaii and Nevada at 10.1 percent each. Nebraska and Vermont had the lowest rates, 3.1 percent each.

Hawaii and Nevada are being impacted by the lack of tourism.

by Calculated Risk on 12/18/2020 08:30:00 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 15th.

From Black Knight: Past Week Sees an Expected Mid-Month Rise in Forbearance Plans

After a slight decline last week (-12,000) forbearances have increased once again, but there is some good news in terms of plan starts.

Our weekly snapshot of McDash Flash daily tracking data showed the number of mortgages in active forbearance saw a 37,000 increase from last Tuesday, mirroring what’s become a common trend of mid-month upticks that we’ve observed so far in 2020.
...
Click on graph for larger image.

As a reminder, since the recovery started, we’ve regularly seen the strongest declines early in the month, as expiring forbearance plans are removed.

The primary driver behind this week’s rise – as is the case with the aforementioned trend of mid-month upticks in general – came from a pullback in such plan exits, which were down considerably – but expectedly – week over week.

With more than 550,000 plans still set to expire at the end of December, we could see more positive news in terms of plan removals in the first week of January.

Overall, the number of active forbearance plans is now up 31,000 from the same time last month, and – as of December 15 – 5.3% of all mortgages (2.79 million) are in forbearance.

Together, they represent $563 billion in unpaid principal. The week saw an increase of 18,000 FHA/VA forbearance plans, 14,000 among PLS/portfolio loans and a modest 5,000 rise in GSE plans.

Overall forbearance plan starts, along with both new plans and re-starts, fell this week, which can be seen as good news given last week’s increases among all three of those categories.
emphasis added

by Calculated Risk on 12/17/2020 08:50:00 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 1,499,146 test results reported over the last 24 hours.

There were 241,620 positive tests.

Almost 43,000 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 16.1% (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 Act Now to see how each state is doing. (updated link to new site)

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

• Record Hospitalizations (Over 114,000)

• Record 7 Day Cases

• Record 7 Day Average Deaths

by Calculated Risk on 12/17/2020 03:16:00 PM

Earlier: Housing Starts increased to 1.547 Million Annual Rate in November

Total housing starts in November were slightly above expectations, however starts in September and October were revised down, combined. The single family sectors has increased sharply, but the volatile multi-family sector is down year-over-year (apartments are under  pressure from COVID).

The housing starts report showed starts were up 1.2% in November compared to October, and starts were up 12.8% year-over-year compared to November 2019.

Single family starts were up 27% year-over-year.  Low mortgage rates and limited existing home inventory have given a boost to single family housing starts.

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

A key point: Housing starts averaged 1.590 million SAAR in the three months prior to the pandemic! That is higher than the last couple of months. 2020 was off to a strong start, and with low interest rates and little competing inventory, starts are solid.

Click on graph for larger image.

Starts were up 12.8% in November compared to November 2019.

Last year, in 2019, starts picked up at the end of the year - and were strong in early 2020 - so the comparison next month will be more difficult.  Don't be surprised if starts are down year-over-year sometime over the next few months.

Starts, year-to-date, are up 7.0% compared to the same period in 2019. This is close to my forecast for 2020, although I didn't expect a pandemic!

I expect starts to remain solid, but the growth rate will slow.

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 - then mostly moved sideways.  Completions (red line) had lagged behind - then completions caught up with starts- then starts picked up a little again late last year, but have fallen off the pandemic.

The last 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.

Single family starts are getting back to more normal levels, and  I expect some further increases in single family starts and completions on rolling 12 month basis.

by Calculated Risk on 12/17/2020 01:32:00 PM

The CAR reported: Low rates, flexibility to work from home drive California home-buying interest to levels not seen since the last decade, C.A.R. reports

efying an otherwise struggling economy, California home sales remained red hot in November, breaking the 500,000 sales benchmark for the first time since January 2009 and reaching the highest level in 15 years, 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 508,820 units in November, 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 November pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

November sales rose 5.0 percent from 484,510 in October and were up 26.3 percent from a year ago, when 402,880 homes were sold on an annualized basis. The year-over-year, double-digit sales gain was the fourth consecutive and the largest yearly gain since May 2009.
...
On a year-to-date basis, sales in the Central Coast region has already surpassed 2019’s level by 4.3 percent, while Southern California (-0.7 percent), the San Francisco Bay Area (-1.2 percent), the Central Valley (-1.5 percent) and the Far North (-2.6 percent) continued to trail slightly behind last year’s level.
...
With a resurgence in COVID-19 cases in recent weeks and the market entering the traditional holiday season, active listings declined from the prior month as expected, contributing to a substantial decline in inventory. Active listings fell 46.6 percent from last year and continued to drop more than 40 percent on a year-over-year basis for the sixth straight month. The Unsold Inventory Index (UII) fell sharply from 3.1 months in November 2019 to 1.9 months this November. 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: Existing home sales are reported when the transaction closes, so this was mostly for contracts signed in September and October.

by Calculated Risk on 12/17/2020 11:18:00 AM

From HotelNewsNow.com: STR: US hotel results for week ending 12 December

U.S. weekly hotel occupancy remained relatively flat from the previous week, according to the latest data from STR through 12 December.

6-12 December 2020 (percentage change from comparable week in 2019):

• Occupancy: 37.8% (-37.4%)
• Average daily rate (ADR): US$85.88 (-31.7%)
• Revenue per available room (RevPAR): US$32.49 (-57.3%)
emphasis added

Since there is a seasonal pattern to the occupancy rate - see graph below - we can track the year-over-year change in occupancy to look for any improvement. This table shows the year-over-year change since the week ending Sept 19, 2020:

Week Ending	YoY Change, Occupancy Rate
9/19	-31.9%
9/26	-31.5%
10/3	-29.6%
10/10	-29.2%
10/17	-30.7%
10/24	-31.7%
10/31	-29.0%
11/7	-35.9%
11/14	-32.7%
11/21	-32.6%
11/28	-28.5%
12/5	-37.9%
12/12	-37.4%

This suggests no improvement over the last 3 months.

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels - before 2020).

Seasonally we'd expect the occupancy rate to decline into the new year. 

Note: Y-axis doesn't start at zero to better show the seasonal change.

by Calculated Risk on 12/17/2020 11:05:00 AM

From the Philly Fed: December 2020 Manufacturing Business Outlook Survey

Manufacturing activity in the region continued to grow, but growth was less widespread, according to firms responding to the December Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments remained positive for the seventh consecutive month but fell notably from their readings in November. Some future indexes also moderated this month but continue to indicate that firms expect growth over the next six months.

The diffusion index for current activity fell 15 points to 11.1 in December, its lowest positive reading following its fall to long-term lows in April and May... On balance, fewer firms reported increases in manufacturing employment this month. The current employment index has remained positive for six consecutive months but decreased 19 points to 8.5 in December.
emphasis added

This was lower than the consensus forecast.

And from the Kansas City Fed: Tenth District Manufacturing Activity Expanded Further

The Federal Reserve Bank of Kansas City released the December Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity expanded further in December. Manufacturing activity was still below year ago levels, but expectations for future activity were positive.

“Regional factories reported another month of solid growth, but activity continues to lag preCOVID levels,” said Wilkerson. “The recent wave of COVID-19 has negatively affected manufacturers, but many firms still indicated significant capital spending plans for the coming year.”
...
The month-over-month composite index was 14 in December, up from 11 in November and 13 in October

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

These early reports suggest the ISM manufacturing index will show expansion in December, but will likely decrease from the November level.

by Calculated Risk on 12/17/2020 08:48:00 AM

The DOL reported:

In the week ending December 12, the advance figure for seasonally adjusted initial claims was 885,000, an increase of 23,000 from the previous week's revised level. The previous week's level was revised up by 9,000 from 853,000 to 862,000. The 4-week moving average was 812,500, an increase of 34,250 from the previous week's revised average. The previous week's average was revised up by 2,250 from 776,000 to 778,250.
emphasis added

This does not include the 455,037 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 415,037 the previous week.

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 812,500.

The previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims decreased to 5,508,000 (SA) from 5,781,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 9,244,556 receiving Pandemic Unemployment Assistance (PUA) that increased from 8,555,763 the previous week (there are questions about these numbers). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance. 

An additional 4,801,408 are receiving Pandemic Emergency Unemployment Compensation (PEUC) that increased from 4,532,876 the previous week. These last two programs are set to expire on December 26th.

This was much higher than expected, and this was for the BLS reference week for the December employment report.