by Calculated Risk on 4/04/2013 12:02:00 PM

Reis reported that the vacancy rate for regional malls declined to 8.3% in Q1, down from 8.6% in Q4 2012. This is down from a cycle peak of 9.4% in Q3 2011.

For Neighborhood and Community malls (strip malls), the vacancy rate declined slightly to 10.6% in Q1, down from 10.7% in Q4 2012. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011.

Comments from Reis Senior Economist Ryan Severino:

[Strip Malls] Yet again, vacancy declined by only 10 bps during the first quarter. Although it is welcome that vacancy continues to decline on an almost quarterly basis, there is still no acceleration in vacancy compression. On a year‐over‐year basis, the vacancy rate declined by only 30 bps. Net absorption continues to outpace new construction, marginally pushing vacancy rates downward. With only 873,000 square feet delivered, even moderate demand for space would result in meaningful declines in the national vacancy rate. Yet despite the dearth of new completions, demand remains insufficient to make a meaningful dent in what is still an elevated vacancy rate.
...
[New construction] With retail sales struggling to recover and muted demand for space, new construction remained near record‐low levels during the quarter. 873,000 square feet were delivered during the first quarter, versus 1.231 million square feet during the fourth quarter. However, this is a slowdown compared to the 2.051 million square feet of retail space that were delivered during the first quarter of 2012. In fact, 873,000 square feet is the fourth‐lowest figure on record since Reis began tracking quarterly data in 1999. With demand for space remaining at abject levels, there exists virtually no incentive to develop new projects. 873,000 square feet is the equivalent of one or two medium‐sized properties.
...
[Regional] Once again, malls outperformed their neighborhood and community shopping center brethren. The national vacancy rate declined by another 30 basis points during the quarter. This is the sixth consecutive quarter with a vacancy decline. Asking rent growth accelerated versus last quarter, growing by another 0.4%. This was the eighth consecutive quarter of asking rent increases. The improvement in mall subsector picked up some pace during the first quarter. The thirty basis point compression in vacancy is the largest since the first quarter of 2003 and the 0.4% asking rent increase is the largest since the first quarter of 2008. However, as we have stated in quarters past, the recovery in the mall subsector is being driven by Dominant/Class A malls, which typically boast luxury retailers and cater to affluent consumers. This belies the fact that the remainder of the mall sector continues to struggle.

Click on graph for larger image.

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

The yellow line shows mall investment as a percent of GDP through Q4. This has increased from the bottom because this includes renovations and improvements. New mall investment has essentially stopped.

The good news is, as Severino noted, new square footage is near a record low, and with very little new supply, the vacancy rate will probably continue to decline slowly.

Mall vacancy data courtesy of Reis.

by Calculated Risk on 4/04/2013 10:00:00 AM

Press Release: Trulia Reports Rents for Single-family Homes Flatten Nationwide

Heading into the spring house hunting season, asking home prices rose 7.2 percent year-over-year (Y-o-Y) nationally in March. Seasonally adjusted, prices rose 1.1 percent month-over-month and 3.5 percent quarter-over-quarter. Regionally, prices rose in 91 of the 100 largest metros.

Nearly 4 million more single-family homes have been added to the rental market since 2005 . This new supply has fully caught up with the increased rental demand during the housing crisis – causing single-family home rents to flatten nationwide. Nationally, rents rose 2.4 percent Y-o-Y. For apartments only rents rose 2.9 percent Y-o-Y, while rents for single-family homes were flat, rising just 0.1 percent Y-o-Y. In Las Vegas, Orange County, Los Angeles, Atlanta, and Phoenix, where investors have actively bought and rented out single-family homes, rents are either falling or flat.
...
“Investors bought up cheap houses in hard-hit markets and rented them out to people who lost their homes to foreclosure or delayed first-time homeownership,” said Jed Kolko, Trulia’s Chief Economist. “With four million more rental homes now than during the bubble, supply has expanded to meet demand, and rents are flat or falling in markets where investors are most active.”

On rents, this is similar to the Reis report yesterday on apartments. It appears that rent increases are slowing.

Note: These asking prices are SA (Seasonally Adjusted) - and adjusted for the mix of homes - and this suggests further house price increases over the next few months on a seasonally adjusted basis.

by Calculated Risk on 4/04/2013 08:37:00 AM

The DOL reports:

In the week ending March 30, the advance figure for seasonally adjusted initial claims was 385,000, an increase of 28,000 from the previous week's unrevised figure of 357,000. The 4-week moving average was 354,250, an increase of 11,250 from the previous week's unrevised average of 343,000.

The previous week was unrevised at 357,000.

The following graph shows the 4-week moving average of weekly claims since January 2000.

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 354,250 - the highest level since February.

Weekly claims were above the 350,000 consensus forecast.  Note: This appears to be the beginning of the impact of the "sequestration" budget cuts.

by Calculated Risk on 4/03/2013 10:28:00 PM

On the March employment report from economist Sven Jari Stehn at Goldman Sachs:

Our forecast for the March employment report is a 175,000 gain in nonfarm payrolls (below the current Bloomberg consensus of a 195,000 gain), a stable 7.7% unemployment rate (in line with the consensus), and a 0.1% gain in average hourly earnings (below the consensus of 0.2%). The reasoning for our below-consensus payroll forecast is threefold.

1. The tone of the March US labor market indicators has, on balance, softened. ...

2. Special factors are likely to weigh on March payrolls. We expect a small hit of roughly 10,000 from sequestration in Friday's report. ... Separately, a negative contribution from the normalization of February's outsized employment gain in motion picture and sound recording industries appears likely. ...

3. Payrolls have outpaced broader labor market measures. ... While actual payroll growth has averaged around 200,000 over the last four months, the broader labor market dataflow has only been consistent with payroll growth of around 150,000 during this period.

I'll post an employment preview tomorrow.

Thursday economic releases:
• 8:30 AM ET, the initial weekly unemployment claims report will be released. The consensus is for claims to decrease to 350 thousand from 357 thousand last week. The "sequester" budget cuts appear to be impacting weekly claims.

• Early, Reis Q1 2013 Mall Survey of rents and vacancy rates will be released.

• At 10:00 AM, Trulia House Price Rent Monitors for March. This is the index from Trulia that uses asking house prices adjusted both for the mix of homes listed for sale and for seasonal factors.

• At 5:00 PM, Speech by Fed Vice Chair Janet Yellen, Communication in Monetary Policy, At the 50th Anniversary Conference of the Society of American Business Editors and Writers, Washington, D.C.

by Calculated Risk on 4/03/2013 05:18:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency rate declined in February to 3.13% from 3.18% in January. The serious delinquency rate is down from 3.82% in February 2012, and this is the lowest level since February 2009.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59%.

Earlier Freddie Mac reported that the Single-Family serious delinquency rate declined in February to 3.15% from 3.20% in January. Freddie's rate is down from 3.57% in February 2012, and this is the lowest level since July 2009. Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

Note: These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

Although this indicates some progress, the "normal" serious delinquency rate is under 1%.  At the recent pace of improvement, it will take several years until the rates are back to normal. At the recent rate of improvement, the serious delinquency rate will be under 1% in 2017 or so.