by Calculated Risk on 7/02/2014 09:51:00 AM

Reis reported that the apartment vacancy rate was unchanged in Q2 at 4.1%. In Q2 2013 (a year ago) the vacancy rate was at 4.3%, and the rate peaked at 8.0% at the end of 2009.

Some interesting comments from Reis Senior Economist Ryan Severino:

Vacancy was unchanged during the second quarter at 4.1%, a slight worsening versus last quarter. Over the last twelve months the national vacancy rate has declined by 20 basis points, slightly below the pace of the last few quarters. We have been anticipating this slowdown in vacancy compression as demand moderates while supply growth accelerates. The national vacancy rate now stands 390 basis points below the cyclical peak of 8.0% observed right after the recession concluded in late 2009. However, at 4.1%, the national vacancy rate remains low by historical standards. The only time vacancy in the US was lower was during the dot.com boom‐and‐bust days of 1999 and 2000.

Demand remained relatively strong during the second quarter, as the sector absorbed 35,102 units. This is down slightly versus last quarter's 40,853 units absorbed but was the largest figure for a second quarter since 2011. Year to date, net absorption is tracking ahead of last year's pace, indicating that demand remains resilient even after more than four years of an apartment market recovery.

Completions during the second quarter totaled 33,210 units. This is a rebound from the first quarter, when construction activity was likely muted by severe winter weather. The overall trend in construction is clearly upward. Despite first quarter's severe winter weather, new construction is already ahead of last year's pace. The market remains on track to deliver the highest level of new completions since 1999 when the economy was growing at a far faster pace than it is today.
...
Asking and effective rents both grew by 0.8% during the second quarter. This is an increase from growth during the first quarter which now appears to be just a temporary slow down, likely due to seasonal factors. Rent growth, though weak by historical standards given such a low vacancy rate, continues to accelerate.
emphasis added

Click on graph for larger image.

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


Apartment vacancy data courtesy of Reis.

by Calculated Risk on 7/02/2014 08:27:00 AM

From ADP:

Private sector employment increased by 281,000 jobs from May to June according to the June ADP National Employment Report®. ... 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.
...
Mark Zandi, chief economist of Moody’s Analytics, said, "The job market is steadily improving. Job gains are broad based across all industries and company sizes. Judging from the job market, the economic recovery remains fully intact and is gaining momentum.”

This was above the consensus forecast for 210,000 private sector jobs added in the ADP report. 

Note: ADP hasn't been very useful in directly predicting the BLS report on a monthly basis, but it might provide a hint. The BLS report for June will be released on Thursday (since Friday is a holiday).

by Calculated Risk on 7/02/2014 07:01:00 AM

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

Mortgage applications decreased 0.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 27, 2014. ...

The Refinance Index increased 0.1 percent from the previous week. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. ...
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($417,000 or less) decreased to 4.28 percent from 4.33 percent, with points decreasing to 0.14 from 0.18 (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 refinance index.

The refinance index is down 75% from the levels in May 2013.

As expected, refinance activity is very low this year.


The second graph shows the MBA mortgage purchase index.  

According to the MBA, the unadjusted purchase index is down about 16% from a year ago.

by Calculated Risk on 7/01/2014 07:40:00 PM

The BLS released the Metropolitan Area Employment and Unemployment report for May today.

Unemployment rates were lower in May than a year earlier in 357 of the 372 metropolitan areas, higher in 11 areas, and unchanged in 4 areas, the U.S. Bureau of Labor Statistics reported today. Twelve areas had jobless rates of at least 10.0 percent and 93 areas had rates of less than 5.0 percent. ...

Yuma, Ariz., and El Centro, Calif., had the highest unemployment rates in May, 26.5 percent and 21.1 percent, respectively. Bismarck, N.D., had the lowest unemployment rate, 2.2 percent.

It is interesting to look at a few areas I've been tracking. As an example, the unemployment rate in Sacramento has fallen from a high of 12.9% to 6.7% in May. No wonder housing has improved!

And another area I've been tracking is the Inland Empire in California.  Way back in 2006 I disagreed with some analysts on the outlook for the Inland Empire in California. I wrote:

As the housing bubble unwinds, housing related employment will fall; and fall dramatically in areas like the Inland Empire. The more an area is dependent on housing, the larger the negative impact on the local economy will be.

So I think some pundits have it backwards: Instead of a strong local economy keeping housing afloat, I think the bursting housing bubble will significantly impact housing dependent local economies.

And sure enough, the economies of housing dependent areas like the Inland Empire were devastated during the housing bust. The good news is the Inland Empire is now recovering.

Click on graph for larger image.

This graph shows the unemployment rate for the Inland Empire (using MSA: Riverside, San Bernardino, Ontario), and also the number of construction jobs as a percent of total employment.

The unemployment rate is falling, but still high at 8.0% (down from 15.0% in 2010). And construction employment is still low, but starting to increase.

Obviously the outlook for the Inland Empire is much better today.

Wednesday:
• Early, Reis Q2 2014 Apartment Survey of rents and vacancy rates.

• 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 June. This report is for private payrolls only (no government). The consensus is for 210,000 payroll jobs added in June, up from 180,000 in May.

• At 10:00 AM, Manufacturers' Shipments, Inventories and Orders (Factory Orders) for May. The consensus is for a 0.3% decrease in May orders.

• At 11:00 AM, Speech by Fed Chair Janet Yellen, Financial Stability, At the Inaugural Michel Camdessus Central Banking Lecture at the International Monetary Fund, Washington, D.C.

by Calculated Risk on 7/01/2014 02:55:00 PM

Based on an WardsAuto estimate, light vehicle sales were at a 16.9 million SAAR in June. That is up 7% from June 2013, and up 1% from the 16.7 million annual sales rate last month.

This was above the consensus forecast of 16.4 million SAAR (seasonally adjusted annual rate).

Click on graph for larger image.

This graph shows the historical light vehicle sales from the BEA (blue) and an estimate for June (red, light vehicle sales of 16.9 million SAAR from WardsAuto).

Severe weather clearly impacted sales in January and February.  Since then vehicle sales have been very strong.

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

Note: dashed line is current estimated sales rate.

Unlike residential investment, auto sales bounced back fairly quickly following the recession and were a key driver of the recovery.