by Calculated Risk on 1/30/2013 08:39:00 AM

From the BEA:

Real gross domestic product -- the output of goods and services produced by labor and property located in the United States -- decreased at an annual rate of 0.1 percent in the fourth quarter of 2012 (that is, from the third quarter to the fourth quarter), according to the "advance" estimate released by the Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent

The increase in real GDP in the second quarter primarily reflected positive contributions from personal consumption expenditures (PCE), exports, nonresidential fixed investment, private inventory investment, and residential fixed investment that were partly offset by a negative contribution from state and local government spending. Imports, which are a subtraction in the calculation of GDP, increased.

The decrease in real GDP in the fourth quarter primarily reflected negative contributions from private inventory investment, federal government spending, and exports that were partly offset by positive contributions from personal consumption expenditures (PCE), nonresidential fixed investment, and residential fixed investment. Imports, which are a subtraction in the calculation of GDP, decreased.

Personal consumption expenditures (PCE) increased at a 2.2% annualized rate, and residential investment increased 15.3%, equipment and software increased 12.4%. That is a solid increase in fixed investment.

"Change in private inventories" subtracted 1.27 percentage points from GDP in Q4, and the Federal government subtracted 1.25 percentage points (mostly a sharp decrease in defense spending).

This was below expectations, but the internals were decent with PCE and private investment increasing (domestic demand). I'll have more on GDP later ...

by Calculated Risk on 1/30/2013 08:20:00 AM

From ADP:

Private sector employment increased by 192,000 jobs from December to January, according to the January ADP National Employment Report®, which is produced by ADP® ... in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis. The December 2012 report, which reported job gains of 215,000, was revised downward by 30,000 to 185,000 jobs.

Mark Zandi, chief economist of Moody’s Analytics, said, “The job market is slowly, but steadily, improving. Monthly job gains appear to have accelerated from near 150,000 to closer to 175,000. Construction is finally kicking into gear and more than offsetting the weakness in manufacturing. The recent gains may be overstating any improvement, particularly in the context of recent revivals in growth at the start of the past three years, but the gains are encouraging nonetheless.”

This was above the consensus forecast for 172,000 private sector jobs added in the ADP report. Note:  The BLS reports on Friday, and the consensus is for an increase of 155,000 payroll jobs in January, on a seasonally adjusted (SA) basis.

Note: ADP hasn't been very useful in predicting the BLS report.

by Calculated Risk on 1/29/2013 07:16:00 PM

Doug Short provides a preview on GDP: WSJ Economists' GDP Forecasts: 1.6% for Q4 2012 and 1.7 in Q1 2013

A big economic announcement this week will be tomorrow's Advance Estimate for Q4 GDP from the Bureau of Economic Analysis. The final number for Q3 GDP was 3.1%. The general consensus is that Q4 will show a significant decline in this broad measure of the economy. Investing.com weighs in at 1.8%. According to Briefing.com, the consensus for Q4 is 1.0%. However, Briefing.com's own estimate, I should point out, is considerably lower at 0.1%.

From Merrill Lynch:

The first release of Q4 GDP is likely to show that growth weakened at the end of 2012. We forecast GDP growth of 1.0%, down from the 3.1% pace in Q3. However, much of the slowdown owes to a contraction in inventories and widening in the trade deficit; domestic final sales should hold close to 2.0%. As such, we advise smoothing through the two quarters to gauge the underlying trend of the economy.

We expect a decent gain in consumer spending of 2.3% and a solid increase in residential investment of 17%. ... The healthy gain in residential investment reflects the turn in homebuilding and greater renovation spending. We also expect equipment and software investment to increase after declining in Q3. On the downside, the trade deficit is likely to widen due to a sharp drop in exports. The biggest drag, however, will come from a sharp contraction in inventories.

As always, the details will matter.

Wednesday economic releases:
• 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 January will be released. This report is for private payrolls only (no government). The consensus is for 172,000 payroll jobs added in January. Even with the new methodology, the report still hasn't been that useful in predicting the BLS report.

• At 8:30 AM, the Q4 GDP report will be released. This is the advance (first) release from the BEA. The consensus is that real GDP increased 1.0% annualized in Q4.

• Around 11:15 AM, the FOMC Meeting Announcement will be released. No significant changes are expected,

Earlier on House Prices:
• Case-Shiller: House Prices increased 5.5% year-over-year in November
• Comment on House Prices, Real House Prices, and Price-to-Rent Ratio
• All Current House Price Graphs

by Calculated Risk on 1/29/2013 03:50:00 PM

CR Note: This is wonkish, but important for those using the HVS. An excerpt from economist Tom Lawler: Housing Vacancy Survey: Vacancy Rates “Mixed” on Quarter, Down from Year Ago; Reported Homeownership Rate Lowest Since 1996 (and “True” Homeownership Even Lower!)

The Census Bureau released the “Residential Vacancies and Homeownership” Report for Q4/2012, which is based on the “Housing Vacancy Survey” supplement to the Current Population Survey. The HVS results have not been consistent with the results from the last two decennial Censuses, with the HVS significantly overstating housing vacancy rates and homeownership rates – with the HVS/Census “gap” growing from 2000 to 2010.

According to the Q4 HVS results, the US rental vacancy rate last quarter was 8.7%, up from 8.6% in the previous quarter but down from 9.4% in Q4/11; the HVS homeowner vacancy rate last quarter ws 1.9%, unchanged from the previous quarter but down from 2.3% in Q4/11; and the US homeownership rate last quarter was 65.4%, down from 65.5% in the previous quarter and 66.0% in Q4/11. Last quarter’s HVS-based homeownership rate estimate was the lowest for a fourth quarter since 1996, and the “actual” homeownership rate last quarter was almost certainly lower.

As highlighted in the “sources and accuracy” page of the CPS/HVS, the HVS results for many key measures vary dramatically from decennial Census results.

	1990	2000	2010
	Rental Vacancy Rate
HVS first half	7.2%	7.9%	10.6%
Census (April 1)	8.5%	6.8%	9.2%
HVS - Census	-1.3%	1.1%	1.4%
	Homeowner Vacancy Rate
HVS first half	1.7%	1.5%	2.6%
Census (April 1)	2.1%	1.7%	2.4%
HVS - Census	-0.4%	-0.2%	0.2%
	Homeownership Rate
HVS first half	63.9%	67.2%	67.0%
Census (April 1)	64.2%	66.2%	65.1%
HVS - Census	-0.3%	1.0%	1.9%

While it is generally agreed that the HVS does not provide an accurate picture of the US housing market, and Census analysts are “concerned” about the growing “gap” between the HVS and the decennial Census, to the best of my knowledge no work has been done on identifying whether the HVS inaccuracies are related to sampling errors, non-sampling errors, or both.

The HVS report includes “estimates” of the US housing stock by occupancy and vacancy status, but its estimates for the total housing stock are based on housing stock estimates from the Population Division of Census, which are “benchmarked” to decennial Census results. Stated another way, the HVS assumes that the decennial Census estimates of the housing stock are accurate, but also implicitly assumes that the decennial Census estimates of the number of occupied units – total and by tenure – and the number of vacant units – total and by vacancy status – are “bogus.”

Here is the table on the US housing stock from today’s HVS report.

Click on table for larger image.

It is worth noting that the 90% confidence interval shown in the HVS report are measures of “sampling variability,” and assume that the sample used is an unbiased sample of the entire housing “universe.” Statistical comparisons between the HVS and the ACS reject the hypothesis that both surveys use unbiased samples from the same housing universe, while comparisons of the HVS and the decennial Census reject the hypothesis that the HVS estimates are unbiased estimates of housing vacancy and homeownership rates.

A recent study comparing the housing “universe” used for the 2010 ACS with that of the decennial Census revealed some startling (and troubling) differences in terms of both housing units omitted or erroneously excluded and (especially) “housing” unit erroneously included. The HVS sample almost certainly has even bigger “issues.”

The biggest apparent “bias” in the HVS is that it materially underestimates the number/share of the housing stock that is occupied by renters (and overstates the number/share of the housing stock that is vacant). I am not sure why.
...
Lawler concludes: The “true” US homeownership rate last quarter was probably the lowest since the mid-80’s.

by Calculated Risk on 1/29/2013 01:34:00 PM

The Census Bureau released the Housing Vacancies and Homeownership report for Q4 2012 this morning.

This report is frequently mentioned by analysts and the media to track the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.  Note: I expect housing economist Tom Lawler to send me some comments on this today.

This survey might show the trend, but I wouldn't rely on the absolute numbers.  The Census Bureau is investigating the differences between the HVS, ACS and decennial Census, and analysts probably shouldn't use the HVS to estimate the excess vacant supply, or rely on the homeownership rate, except as a guide to the trend.

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010. The HVS homeownership rate decreased slightly to 65.4%, and down from 65.5% in Q3.

I'd put more weight on the decennial Census numbers and that suggests the actual homeownership rate is probably in the 64% to 65% range.

The HVS homeowner vacancy rate was unchanged at 1.9% in Q4. This is the lowest level since 2005 for this report.

The homeowner vacancy rate has peaked and is now declining, although it isn't really clear what this means. Are these homes becoming rentals? Anyway - once again - this probably shows that the trend is down, but I wouldn't rely on the absolute numbers.

The rental vacancy rate was increased in Q4 to 8.7%, from 8.6% in Q3.

I think the Reis quarterly survey (large apartment owners only in selected cities) is a much better measure of the overall trend in the rental vacancy rate - and Reis reported that the rental vacancy rate has fallen to the lowest level since 2001.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey. Unfortunately many analysts still use this survey to estimate the excess vacant supply. However this does suggest that the housing vacancy rates have declined sharply.

Earlier on House Prices:
• Case-Shiller: House Prices increased 5.5% year-over-year in November
• Comment on House Prices, Real House Prices, and Price-to-Rent Ratio
• All Current House Price Graphs