by Calculated Risk on 1/05/2012 08:15:00 AM

ADP reports:

Private-sector employment increased by 325,000 from November to December on a seasonally adjusted basis, according to the latest ADP National Employment Report® released today. The ADP National Employment Report, created by Automatic Data Processing, Inc. (ADP®), in partnership with Macroeconomic Advisers, LLC, is derived from actual payroll data and measures the change in total nonfarm private employment each month. The estimated gain in employment from October to November was revised down slightly to 204,000 from the initially reported 206,000.

This was well above the consensus forecast of an increase of 160,000 private sector jobs in December. The BLS reports on Friday, and the consensus is for an increase of 150,000 payroll jobs in December, on a seasonally adjusted (SA) basis.

Government payrolls have been shrinking by about 24,000 per month this year. So this suggests around 325,000 private nonfarm payroll jobs added, minus 24,000 government workers - or around 301,000 total jobs added in December. Of course ADP hasn't been very useful in predicting the BLS report.

by Calculated Risk on 1/05/2012 12:36:00 AM

Reis reported that the apartment vacancy rate (82 markets) fell to 5.2% in Q4 from 5.6% in Q3. The vacancy rate was at 6.6% in Q4 2010 and peaked at 8.0% at the end of 2009.

From the WSJ: Apartment-Vacancy Rate Tumbles to 2001 Level

The nation's apartment-vacancy rate in the fourth quarter fell to its lowest level since late 2001 ... In the fourth quarter, the vacancy rate fell to 5.2% from 6.6% a year earlier and 5.6% at the end of the third quarter, according to Reis.

During the depths of the downturn, landlords had to offer incentives such as flat-screen TVs and months with no rent to attract tenants. But in the fourth quarter of 2011, landlords in 71 of the 82 of the markets that Reis follows were able to raise rents. ... Nationwide, landlords raised asking rents an average of 0.4% in the fourth quarter, to $1,064 a month. That's up from $1,026 in 2009.

But rent increases showed signs of moderating in some markets and, overall, they were less than Reis had expected.

Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 2005.

Reis is just for large cities, but this decline in vacancy rates is happening just about everywhere. More from Bloomberg: U.S. Apartment Vacancies Decline to a Decade Low of 5.2%, Rents Increase

“The sector is benefiting from some of the lowest figures for new construction on record,” Calanog said. “By 2013, the influx of new units may begin eroding any benefit the sector derives from tight supply conditions.”

A total of 8,865 new units became available in the fourth quarter, the second-fewest for any three-month period in Reis records dating to 1999. The first quarter of 2011 had the fewest units, at 7,473.

For all of 2011, 37,678 units were completed, the lowest annual total in 31 years of Reis data. The previous record was 49,303 in 1993 during the savings and loan crisis.

A few key points we've been discussing all year:
• Apartment vacancy rates are falling fast.

• A record low number of multi-family units were completed in 2011.

• Multi-family starts are increasing, and that is helping both GDP and employment growth this year. These new starts will not be completed until 2012 or 2013, so vacancy rates will probably continue to decline.

by Calculated Risk on 1/04/2012 09:10:00 PM

A few interesting reads ...

• From FT Alphaville: ‘Tis (still) the seasonality, ISM edition. An interesting discussion of seasonality, and how recent the recent ISM survey might be overstating strength.

• From the NY Fed: Forecasting with Internet Search Data. This is an attempt to get more recent information since data is released with a lag. I tried this with "New Homes" and it appears to track, but it is a little too noisy to use to predict new home sales from the Census Bureau.

• From Jon Lansner at the O.C. Register: Van line: Calif. jumps to No. 7 U.S. destination

Allied Van Lines’ 44th annual “Magnet States Report” says that at least by its own business patterns California is back as on the “inbound list” — states with more folks moving in than out. ... Illinois had the most net outbound losses followed by Pennsylvania, Michigan, New Jersey and New York.

• From Tim Duy at Fed Watch: Still Cautious Heading Into 2012

Bottom Line: I want to believe the recent improvement in the tenor of economic data signals that activity is set to accelerate substantially in 2012. But the ups and downs on the past two years smoothed out to nothing exciting or catastrophic, just a moderate path of activity that remains woefully insufficient to return the US economy to its pre-recession trend. For now, I will stick to that middle ground, while remaining watchful of the all-too-many downside risks that leave me just a little bit sleepless each night.

Earlier:
• U.S. Light Vehicle Sales at 13.56 million SAAR in December
• From the Federal Reserve: The U.S. Housing Market: Current Conditions and Policy Considerations
• Question #6 for 2012: Unemployment Rate

by Calculated Risk on 1/04/2012 04:44:00 PM

Based on an estimate from Autodata Corp, light vehicle sales were at a 13.56 million SAAR in December. That is up 8.9% from December 2010, and down 0.3% from the sales rate last month (13.60 million SAAR in Nov 2011).

This was at the consensus forecast of 13.6 million SAAR.

This graph shows the historical light vehicle sales (seasonally adjusted annual rate) from the BEA (blue) and an estimate for December (red, light vehicle sales of 13.56 million SAAR from Autodata Corp).

Click on graph for larger image.

The annualized sales rate was essentially unchanged from November, and the last two months were the strongest since June 2008 excluding cash-for-clunkers.

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

This shows the huge collapse in sales in the 2007 recession. This also shows the impact of the tsunami and supply chain issues on sales, especially in May and June.

Note: dashed line is current estimated sales rate.

Growth in auto sales should make a strong positive contribution to Q4 GDP. Sales in Q3 averaged 12.45 million SAAR, and sales averaged 13.46 million SAAR in Q4, an increase of 8.1% over Q3.

by Calculated Risk on 1/04/2012 02:53:00 PM

From the Federal Reserve: The U.S. Housing Market: Current Conditions and Policy Considerations. Excerpt on converting REO to rental units:

At the same time that housing demand has weakened, the number of homes for sale is elevated relative to historical norms, due in large part to the swollen inventory of homes held by banks, guarantors, and servicers after completion of foreclosure proceedings. These properties are often called real estate owned, or REO, properties. While the total stock of REO properties is difficult to measure precisely, perhaps one-fourth of the 2 million vacant homes for sale in the second quarter of 2011 were REO properties. The combination of weak demand and elevated supply has put substantial downward pressure on house prices, and the continued flow of new REO properties--perhaps as high as 1 million properties per year in 2012 and 2013--will continue to weigh on house prices for some time. To the extent that REO holders discount properties in order to sell them quickly, the near-term pressure on home prices might be even greater.

In contrast to the market for owner-occupied houses, the market for rental housing across the nation has recently strengthened somewhat. Rents have turned up in the past year, and the national vacancy rate on multifamily rental properties has dropped noticeably from its peak in late 2009. These developments have been fairly widespread across metropolitan areas. The relative strength of the rental market reflects increased demand as families who are unable or unwilling to purchase homes are renting properties instead. Rental demand has also been supported by families who have lost their homes to foreclosure--the majority of whom move to rental housing, most commonly to single-family rentals.

The price signals in the owner-occupied and rental housing markets--that is, the decline in house prices and the rise in rents--suggest that it might be appropriate in some cases to redeploy foreclosed homes as rental properties. In addition, the forces behind the decline in the homeownership rate, such as tight credit conditions, are unlikely to unwind significantly in the immediate future, indicating a longer-term need for an expanded stock of rental housing.

Although small investors are currently buying and converting foreclosed properties to rental units on a limited scale, larger-scale conversions have not occurred for at least three interrelated reasons. First, it can be difficult for an investor to assemble enough geographically proximate properties to achieve efficiencies of scale with regard to the fixed costs of a rental program. Second, attracting investors to bulk sales opportunities--whether for rental or resale--has typically required REO holders to offer significantly larger price concessions relative to direct sales to owner occupants through conventional realtor-listing channels, in part because it can be difficult for investors to obtain financing for such sales. Third, the supervisory policy of GSE and banking organization regulators has generally encouraged sales of REO property as early as practicable. We discuss each of these issues in more detail later [in the white paper].

I suspect the FHFA will announce a bulk sale program of REO to investors within the next month or two.