by Calculated Risk on 1/07/2025 01:48:00 PM

Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year

Brief excerpt:

Another monthly update on rents.

Tracking rents is important for understanding the dynamics of the housing market. Slower household formation and increased supply (more multi-family completions) has kept asking rents under pressure. ...

Welcome to the January 2025 Apartment List National Rent Report. The national median monthly rent closed out 2024 at $1,373 in December, after declining by 0.6 percent, or $8, from the prior month. Year-over-year rent growth nationally also currently stands at -0.6 percent, meaning that the typical apartment is currently renting for slightly less than it was one year ago. ...

Realtor.com: 16th Consecutive Month with Year-over-year Decline in Rents

In November 2024, the U.S. median rent continued to decline year-over-year for the sixteenth month in a row, down $19 or -1.1% year-over-year for 0-2 bedroom properties across the top 50 metros, faster than the rate of -0.8% seen in October 2024.

This is much more in the article.

by Calculated Risk on 1/07/2025 12:28:00 PM

(Posted with permission). The ISM® Services index was at 54.1%, up from 52.1% last month. The employment index decreased to 51.4%, from 51.5%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 54.1% December 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded for the sixth consecutive month in December, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 54.1 percent, indicating expansion for the 52nd time in 55 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In December, the Services PMI® registered 54.1 percent, 2 percentage points higher than November’s figure of 52.1 percent. The reading in December marked the 10th time the composite index has been in expansion territory this year. The Business Activity Index registered 58.2 percent in December, 4.5 percentage points higher than the 53.7 percent recorded in November, indicating a sixth consecutive month of expansion and finishing the year with its third-highest reading for 2024. The New Orders Index recorded a reading of 54.2 percent in December, 0.5 percentage point higher than November’s figure of 53.7 percent. The Employment Index remained in expansion territory for the fifth time in six months; the reading of 51.4 percent is a 0.1-percentage point decrease compared to the 51.5 percent recorded in November.
emphasis added

This was above consensus expectations.

by Calculated Risk on 1/07/2025 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 8.1 million on the last business day of November, the U.S. Bureau of Labor Statistics reported today. Over the month, hires and total separations were little changed at 5.3 million and 5.1 million, respectively. Within separations, quits (3.1 million) decreased, but layoffs and discharges (1.8 million) changed little.
emphasis added

The following graph shows job openings (black 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 November; the employment report this Friday will be for December.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually 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.

The spike in layoffs and discharges in March 2020 is labeled, but off the chart to better show the usual data.

Jobs openings increased in November to 8.10 million from 7.84 million in October.

The number of job openings (black) were down 9% year-over-year. 

Quits were down 13% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 1/07/2025 08:30:00 AM

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $78.2 billion in November, up $4.6 billion from $73.6 billion in October, revised.

November exports were $273.4 billion, $7.1 billion more than October exports. November imports were $351.6 billion, $11.6 billion more than October imports.
emphasis added

Click on graph for larger image.

Exports and imports increased in November.

Exports are up 6.6% year-over-year; imports are up 9.4% year-over-year.

Both imports and exports have generally increased recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China increased to $25.0 billion from $21.6 billion a year ago.  It is likely some importers are trying to beat potential tariffs.

by Calculated Risk on 1/06/2025 08:11:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Barely Budge to Start New Week

The bond market and interest rates have arrived at the first full week of the new year almost exactly where they left off before the X-mas/New Year holiday weeks. ... Although the past 2 weeks have been uneventful for rates, the next 2 weeks will be heavily influenced by incoming economic data. There are several honorable mentions over the next few days before getting to this week's headliner on Friday: the jobs report. [30 year fixed 7.10%]
emphasis added

Tuesday:
• At 8:30 AM ET, Trade Balance report for November from the Census Bureau. The consensus is the trade deficit to be $77.5 billion.  The U.S. trade deficit was at $73.8 billion in October.

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

• Also at 10:00 AM, the ISM Services Index for December.

by Calculated Risk on 1/06/2025 04:55:00 PM

Note: I covered apartments and offices in the newsletter: Moody's: Apartment Vacancy Rate Increased in Q4; Office Vacancy Rate at Record High

From Moody’s Analytics economists: Multifamily Continued to Defy the Supply Shock, Office’s Vacancy Rate Broke Another Record, Retail Rents Drift Higher with Tight Supply, And Industrial Maintains Status Quo

The retail vacancy rate remained stable at 10.3% in Q4, putting a pause to a one-time decline in the previous quarter. Both asking and effective rent enjoyed a slight increase of 0.3%, reaching $21.90 and $19.19/sqft respectively. This steady performance fit in with the backdrop of retail sales exceeding expectations again in the fourth quarter, with October and November witnessing 0.5% and 0.7% growth respectively. Although these gains were primarily driven by purchases of motor vehicles and online merchandise, this surge in consumer spending reflected the resilience of the labor market, robust household finances, accompanied by Federal Reserve interest rate cuts and a slowdown in inflation, which together bolstered consumer confidence.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). 

Moody's reports the strip mall vacancy rates was 10.3% in Q4, down slightly from 10.4% in Q4 2023.

Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

Recently the vacancy rate has held fairly steady at a high level as online shopping continues to impact brick and mortar stores.

by Calculated Risk on 1/06/2025 01:55:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the December 2024 seasonally adjusted annual sales rate (SAAR) of 422 thousand.

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 288 thousand SAAR in May 2020.  

Heavy truck sales were at 422 thousand SAAR in December, down from 491 thousand in November, and down 9.5% from 466 thousand SAAR in December 2023.  

Usually, heavy truck sales decline sharply prior to a recession.  This is just one month, and sales might be revised up.

Meanwhile, as I mentioned on Friday, light vehicle sales increased in December.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.  

Vehicle sales were at 16.80 million SAAR in December, up from 16.65 million in November, and up 5.5% from 15.92 million in December 2023.

by Calculated Risk on 1/06/2025 11:07:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Moody's: Apartment Vacancy Rate Increased in Q4; Office Vacancy Rate at Record High

A brief excerpt:

From Moody’s Analytics Economists: Multifamily Continued to Defy the Supply Shock, Office’s Vacancy Rate Broke Another Record, Retail Rents Drift Higher with Tight Supply, And Industrial Maintains Status Quo

Amid record-level inventory growth, average vacancy rate edged up 10 bps in each of the last two quarters and finished 2024 at 6.1%, 40 bps higher than the same time last year and the highest level on record since 2011.

Moody’s Analytics (formerly Reis) reported that the apartment vacancy rate was at 6.1% in Q4 2024, up from an upwardly revised 6.0% in Q3, and up from the pandemic peak of 5.6% in Q1 2021. This is the highest vacancy rate since 2011. Note that asking rents are flat year-over-year. 

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Moody’s Analytics is just for large cities.

There is much more in the article.

by Calculated Risk on 1/06/2025 08:11:00 AM

Altos reports that active single-family inventory was down 2.4% week-over-week.

Inventory will continue to decline seasonally and probably bottom in late January or February.  

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2024.  The black line is for 2019.  

Inventory was up 27.3% compared to the same week in 2023 (last week it was up 26.8%), and down 22.2% compared to the same week in 2019 (last week it was down 16.8%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed significantly!

This second inventory graph is courtesy of Altos Research.

As of Jan 3rd, inventory was at 635 thousand (7-day average), compared to 651 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 1/05/2025 08:04:00 PM

Weekend:
• Schedule for Week of January 5, 2025

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 and DOW futures are down slightly (fair value).

Oil prices were up over the last week with WTI futures at $73.99 per barrel and Brent at $76.46 per barrel. A year ago, WTI was at $74, and Brent was at $78 - so WTI oil prices are unchanged year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.03 per gallon. A year ago, prices were at $3.06 per gallon, so gasoline prices are down $0.03 year-over-year.