by Calculated Risk on 10/03/2024 11:44:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Moody's: Apartment Vacancy Rate Unchanged in Q3; Office Vacancy Rate at Record High

A brief excerpt:

From Moody’s Analytics Economists: Multifamily Performance Steadied, Office Stress Continued to Manifest, Retail Vacancy Declined, And Industrial Cooled Down

National multifamily vacancy stayed flat at 5.8%, the highest level on record since 2011. Supply side pressure was the main driver for the creep-up of vacancy since late 2022.

Moody’s Analytics (Reis) reported that the apartment vacancy rate was at 5.8% in Q3 2024, unchanged from an upwardly revised 5.8% in Q2, 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 down slightly 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 10/03/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 54.9%, up from 51.5% last month. The employment index decreased to 48.1%, from 50.1%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 54.9% September 2024 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded for the third consecutive month in September, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 54.9 percent, which is the highest reading since February 2023 and indicates sector expansion for the 49th time in 52 months.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In September, the Services PMI® registered 54.9 percent, 3.4 percentage points higher than August’s figure of 51.5 percent. The reading in September marked the seventh time the composite index has been in expansion territory this year. The Business Activity Index registered 59.9 percent in September, 6.6 percentage points higher than the 53.3 percent recorded in August, indicating a third month of expansion after a contraction in June. The New Orders Index expanded to 59.4 percent in September, 6.4 percentage points higher than August’s figure of 53 percent. The Employment Index contracted for the first time in three months; the reading of 48.1 percent is a 2.1-percentage point decrease compared to the 50.2 percent recorded in August.
emphasis added

The PMI was well above expectations.

by Calculated Risk on 10/03/2024 08:30:00 AM

The DOL reported:

In the week ending September 28, the advance figure for seasonally adjusted initial claims was 225,000, an increase of 6,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 218,000 to 219,000. The 4-week moving average was 224,250, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 250 from 224,750 to 225,000.
emphasis added

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 decreased to 224,250.

The previous week was revised up.

Weekly claims were above the consensus forecast.

by Calculated Risk on 10/02/2024 07:01:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 224 thousand initial claims, up from 218 thousand last week.

• At 10:00 AM, the ISM Services Index for September.

by Calculated Risk on 10/02/2024 02:03:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the September 2024 seasonally adjusted annual sales rate (SAAR) of 477 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 477 thousand SAAR in September, down from 501 thousand in August, and down 4.7% from 501 thousand SAAR in September 2023.  

Usually, heavy truck sales decline sharply prior to a recession.   Heavy truck sales are solid. 

by Calculated Risk on 10/02/2024 11:04:00 AM

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q2 2024 (just released).
...
Here is some data showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q2 2024.

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.2% (now at 56.2%), and the percent under 5% peaked at 85.5% (now at 74.6%). These low existing mortgage rates makes it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply. This is a key reason existing home inventory levels are so low.

There is much more in the article.

by Calculated Risk on 10/02/2024 08:15:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 143,000 Jobs in September; Annual Pay was Up 4.7%

Private sector employment increased by 143,000 jobs in September and annual pay was up 4.7 percent year-over-year, according to the September ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). ...

“Stronger hiring didn't require stronger pay growth last month,” said Nela Richardson, chief economist, ADP. “Typically, workers who change jobs see faster pay growth. But their premium over job-stayers shrank to 1.9 percent, matching a low we last saw in January.”
emphasis added

This was above the consensus forecast of 110,000. The BLS report will be released Friday, and the consensus is for 145,000 non-farm payroll jobs added in September.

by Calculated Risk on 10/02/2024 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 1.3 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending September 27, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 1.3 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index decreased 3 percent from the previous week and was 186 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 9 percent higher than the same week one year ago.

“Last week’s incoming data showed an economy that is still growing at a solid pace, even as inflation continues to decline. As a result, mortgage rates were up modestly, with the 30-year fixed mortgage rate increasing slightly to 6.14 percent,” said Mike Fratantoni, MBA’s SVP and Chief Economist. With this move, refinance application volume declined on the week but remains almost three-times as high as last year’s pace.”

Added Fratantoni, “The news for the week was that more homebuyers appear to be entering the market. Purchase application activity was up for the week and increased more than 9 percent compared to last year at this time. Inventories of both new and existing homes have been increasing over the course of 2024, meaning that potential buyers have properties to look at and now have somewhat lower mortgage rates leading to better affordability.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.14 percent from 6.13 percent, with points increasing to 0.61 from 0.57 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 9% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 19% from the lows in late October 2023, but still about 1% below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022 - and mostly flat lined for two years - but has increased significantly recently as mortgage rates declined.

by Calculated Risk on 10/01/2024 09:37:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

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

• At 8:15 AM, The ADP Employment Report for September. This report is for private payrolls only (no government). The consensus is for 110,000 jobs added, up from 99,000 in August.

by Calculated Risk on 10/01/2024 05:00:00 PM

Wards Auto released their estimate of light vehicle sales for September: September U.S. Light-Vehicle Sales up Slightly on SAAR basis; Q3 Volume Down 1.9% (pay site).

Sales over the past six months have been mostly in negative territory even though inventory continued to rise. Affordability and a slowdown in fleet orders have been the bane to growth. September saw the continuation of gains in the most affordable segments, but it was more than offset by weakness among higher priced vehicles – a theme of the past two quarters. (Hurricane Helene also slightly dampened deliveries in September.) Despite downturns in Q2 and Q3 of 0.5% and 1.9%, respectively, Q1’s strong 4.9% increase was enough to keep year-to-date volume through September above the year-ago total, albeit less than 1%.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards' estimate for August (red).

Sales in September (15.77 million SAAR) were up 3.7% from August, and up 0.5% from September 2023.

Sales in August were slightly above the consensus forecast.

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

by Calculated Risk on 10/01/2024 12:44:00 PM

From the Census Bureau reported that overall construction spending decreased:

Construction spending during August 2024 was estimated at a seasonally adjusted annual rate of $2,131.9 billion, 0.1 percent below the revised July estimate of $2,133.9 billion. The August figure is 4.1 percent above the August 2023 estimate of $2,047.4 billion.
emphasis added

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,642.2 billion, 0.2 percent below the revised July estimate of $1,645.8 billion. ...

In August, the estimated seasonally adjusted annual rate of public construction spending was $489.8 billion, 0.3 percent above the revised July estimate of $488.2 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential (red) spending is 8.2% below the peak in 2022.

Non-residential (blue) spending is 0.5% below the peak in June 2024.

Public construction spending at the peak.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 2.7%. Non-residential spending is up 3.6% year-over-year. Public spending is up 7.8% year-over-year.

This was below consensus expectations for 0.1% increase in spending. 

by Calculated Risk on 10/01/2024 10:01:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was little changed at 8.0 million on the last business day of August, the U.S. Bureau of Labor Statistics reported today. Over the month, hires changed little at 5.3 million. Total separations changed little at 5.0 million. Within separations, quits (3.1 million) continued to trend down and layoffs and discharges (1.6 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 August; the employment report this Friday will be for September.

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 August to 8.04 million from 7.71 million in July.

The number of job openings (black) were down 14% year-over-year. 

Quits were down 14% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 10/01/2024 10:00:00 AM

(Posted with permission). The ISM manufacturing index indicated expansion. The PMI® was at 47.2% in September, unchanged from 47.2% in August. The employment index was at 43.9%, down from 46.0% the previous month, and the new orders index was at 46.1%, up from 44.6%.

From ISM: Manufacturing PMI® at 47.2% September 2024 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector contracted in September for the sixth consecutive month and the 22nd time in the last 23 months, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 47.2 percent in September, matching the figure recorded in August. The overall economy continued in expansion for the 53rd month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.5 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index remained in contraction territory, registering 46.1 percent, 1.5 percentage points higher than the 44.6 percent recorded in August. The September reading of the Production Index (49.8 percent) is 5 percentage points higher than August’s figure of 44.8 percent. The Prices Index went into contraction (or ‘decreasing’) territory for the first time this year, registering 48.3 percent, down 5.7 percentage points compared to the reading of 54 percent in August. The Backlog of Orders Index registered 44.1 percent, up 0.5 percentage point compared to the 43.6 percent recorded in August. The Employment Index registered 43.9 percent, down 2.1 percentage points from August’s figure of 46 percent.
emphasis added

This suggests manufacturing contracted in September.  This was slightly below the consensus forecast.

by Calculated Risk on 9/30/2024 07:11:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Moderately Higher to Begin The Week

Mortgage rates have generally been moving higher since the Fed cut rates 2 weeks ago. ... While today's weakness can't be reduced to a single factor, the primary motivation was a speech from Fed Chair Powell in which he reminded the market that the Fed was not in a hurry to cut rates. The message wasn't that different from the press conference that followed the Fed rate cut 2 weeks ago, but some market participants were perhaps hoping to see a softer side of Powell. [30 year fixed 6.24%]
emphasis added

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

• Also at 10:00 AM, ISM Manufacturing Index for September. The consensus is for a reading of 47.6, up from 47.2 in August. 

• Also at 10:00 AM, Construction Spending for August. The consensus is for a 0.1% increase.

• All day, Light vehicle sales for September. The consensus is for sales of 15.7 million SAAR, up from 15.1 million SAAR in August (Seasonally Adjusted Annual Rate).

by Calculated Risk on 9/30/2024 02:17:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Freddie Mac House Price Index Increased Slightly in August; Up 3.7% Year-over-year

A brief excerpt:

Freddie Mac reported that its “National” Home Price Index (FMHPI) increased 0.11% month-over-month on a seasonally adjusted (SA) basis in August. On a year-over-year basis, the National FMHPI was up 3.7% in August, down from up 4.5% YoY in July.  The YoY increase peaked at 19.1% in July 2021, and for this cycle, bottomed at up 0.9% YoY in May 2023. ...

Over the last 6 months, the seasonal adjusted index has increased at a 1.5% annual rate
...
As of August, 15 states and D.C. were below their previous peaks, Seasonally Adjusted. The largest seasonally adjusted declines from the recent peak were in Louisiana (-2.5%), Arkansas (-2.1%), D.C. (-2.0), Florida (-1.9%), Texas (-1.5%), and Idaho (-1.1%).

For cities (Core-based Statistical Areas, CBSA), here are the 30 cities with the largest declines from the peak, seasonally adjusted. Austin continues to be the worst performing city. However, 11 of the 30 worst performing cities are now in Florida!

There is much more in the article.

by Calculated Risk on 9/30/2024 01:56:00 PM

From Fed Chair Powell: Economic Outlook (Watch here on YouTube). Excerpt:

Our economy is strong overall and has made significant progress over the past two years toward achieving our dual-mandate goals of maximum employment and stable prices. Labor market conditions are solid, having cooled from their previously overheated state. Inflation has eased, and my Federal Open Market Committee colleagues and I have greater confidence that it is on a sustainable path to 2 percent. At our meeting earlier this month, we reduced the level of policy restraint by lowering the target range of the federal funds rate by 1/2 percentage point. That decision reflects our growing confidence that, with an appropriate recalibration of our policy stance, strength in the labor market can be maintained in an environment of moderate economic growth and inflation moving sustainably down to our objective.

by Calculated Risk on 9/30/2024 10:31:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in August and a Look Ahead to September Sales

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in August.

The big story for August was that existing home sales decreased to 3.86 million on a seasonally adjusted annual rate basis (SAAR) - just above the cycle low of 3.85 million SAAR in October 2023 - and the 36th consecutive month with a year-over-year decline.
...
In August, sales in these markets were down 4.5% YoY. The NAR reported sales were down 5.7% year-over-year NSA in August.

Sales in all of these markets are down compared to August 2019.

This was a year-over-year decrease NSA for these markets. However, there was one fewer working day in August 2024 compared to August 2023 (22 vs 23), so seasonally adjusted sales were down less than NSA sales.

September sales will be mostly for contracts signed in July and August, and mortgage rates decreased to an average of 6.50% in August, down from 6.85% in July. My early expectation is we will see existing home sales up year-over-year in September - for the first time in over 3 years!

There is much more in the article.

by Calculated Risk on 9/30/2024 08:11:00 AM

Altos reports that active single-family inventory was up 0.8% week-over-week. Inventory is now up 48.0% from the February seasonal bottom.  

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of September 27th, inventory was at 731 thousand (7-day average), compared to 725 thousand the prior week. 

This is the highest level of inventory since May 2020.  

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

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

Inventory was up 36.7% compared to the same week in 2023 (last week it was up 37.2%), and down 23.4% compared to the same week in 2019 (last week it was down 24.0%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels is slowly closing.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 9/29/2024 07:08:00 PM

Weekend:
• Schedule for Week of September 29, 2024

Monday:
• At 9:45 AM ET, Chicago Purchasing Managers Index for September. The consensus is for a reading of 46.5, up from 46.1 in August.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for September.

• At 1:55 PM, Speech, Fed Chair Jerome Powell, Economic Outlook, At the National Association for Business Economics (NABE) Annual Meeting, Nashville, Tenn

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

Oil prices were down over the last week with WTI futures at $68.01 per barrel and Brent at $71.86 per barrel. A year ago, WTI was at $91, and Brent was at $96 - so WTI oil prices are down about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.18 per gallon. A year ago, prices were at $3.82 per gallon, so gasoline prices are down $0.64 year-over-year.

by Calculated Risk on 9/29/2024 01:23:00 PM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For August, Realtor.com reported inventory was up 5.8% YoY, but still down 26.4% compared to the 2017 to 2019 same month levels. 

 Now - on a weekly basis - inventory is up 33.2% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending Sept. 21, 2024

• Active inventory increased, with for-sale homes 33.2% above year-ago levels.

For the 46th consecutive week dating back to November 2023, the number of listings for sale has grown year-over-year, and this week continues a string of growth rates in the mid-30% range that started in April. There were more homes for sale this week than in any week since January 2020, pre-pandemic. Much of the inventory build up is due to more seller activity than buyer activity, but falling mortgage rates could mean more buyers enter the market in the coming weeks.

• New listings–a measure of sellers putting homes up for sale- jumped 8.0% this week compared to one year ago.

As the recent easing of mortgage rates kept encouraging many sellers to return to the market, the year-over-year growth in new listings continued this week. With mortgage rates at their lowest level in nearly two years, eager sellers are taking the chance to get their home listed, hoping to catch some of the fall buyer activity. This trend is expected to continue as rates ease further and more sellers are ‘unlocked’.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 46th consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels.