by Calculated Risk on 10/21/2018 09:17:00 AM

From HotelNewsNow.com: US hotel results for week ending 13 October

The U.S. hotel industry reported mixed year-over-year results in the three key performance metrics during the week of 7-13 October 2018, according to data from STR.

In comparison with the week of 8-14 October 2017, the industry recorded the following:

• Occupancy: -0.7% to 71.9%
• Average daily rate (ADR): +1.6% to US$132.76
• Revenue per available room (RevPAR): +0.8% to US$95.42
…
Due to difficult-to-match year-over-year comparisons, Houston, Texas, experienced the steepest declines in occupancy (-25.0% to 63.9%) and RevPAR (-31.3% to US$67.70). Houston’s hotel performance was lifted in the weeks and months that followed Hurricane Harvey in 2017 as properties filled with displaced residents, relief workers, insurance adjustors, media members, etc.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2018, dash light blue is 2017, blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

The occupancy rate, to date, is just ahead of the record year in 2017.

Note: 2017 finished strong due to the impact of the hurricanes.   There will be some boost to hotel occupancy in the Carolina and Florida regions following hurricanes Florence and Michael, but I expect the overall occupancy to be lower in 2018 than in 2017.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 10/20/2018 08:11:00 AM

The key reports this week are September New Home sales, and the advance estimate of Q3 GDP.

For manufacturing, the Richmond, and Kansas City Fed manufacturing surveys will be released this week.

----- Monday, Oct 22nd -----
8:30 AM ET: Chicago Fed National Activity Index for September. This is a composite index of other data.

----- Tuesday, Oct 23rd -----
10:00 AM ET: Richmond Fed Survey of Manufacturing Activity for October.

----- Wednesday, Oct 24th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

9:00 AM: FHFA House Price Index for August 2018. This was originally a GSE only repeat sales, however there is also an expanded index.

10:00 AM: New Home Sales for September from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the sales rate for last month.

The consensus is for 625 thousand SAAR, down from 629 thousand in August.

During the day: The AIA's Architecture Billings Index for August (a leading indicator for commercial real estate).

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, Oct 25th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 212 thousand initial claims, up from 210 thousand the previous week.

8:30 AM: Durable Goods Orders for September from the Census Bureau. The consensus is for a 1.4% decrease in durable goods orders.

10:00 AM: Pending Home Sales Index for September. The consensus is for no change in the index.

11:00 AM: the Kansas City Fed manufacturing survey for October.

----- Friday, Oct 26th -----
8:30 AM: Gross Domestic Product, 3nd quarter 2018 (Advance estimate). The consensus is that real GDP increased 3.3% annualized in Q3, down from 4.2% in Q2.

10:00 AM: University of Michigan's Consumer sentiment index (Final for October). The consensus is for a reading of 99.0.

by Calculated Risk on 10/19/2018 08:04:00 PM

A few comments from Steven Kopits of Princeton Energy Advisors LLC on October 19, 2018:

• Oil rigs were up this week, +4 to 873

• Horizontal oil rigs were flat at 772
...
• Although WTI is down, the Midland price is still near annual highs and well above the Permian breakeven

• We continue to expect a modest recovery in spreads and largely flat rig counts, although the model shows a healthy horizontal oil rig gain next week

• Shale production continues to increase by around 1.5 mbpd / year

Click on graph for larger image.

CR note: This graph shows the US horizontal rig count by basin.

Graph and comments Courtesy of Steven Kopits of Princeton Energy Advisors LLC.

by Calculated Risk on 10/19/2018 02:42:00 PM

The BEA is scheduled to release the advance estimate of Q3 GDP on Friday, Oct 26th. The early consensus is real GDP increased 3.3% on an annualized basis in Q3. Here are a few forecasts:

From Merrill Lynch:

We expect 3Q GDP growth of 3.4% in the advance release next week. [Oct 19 estimate].
emphasis added

From Goldman Sachs:

We left our Q3 GDP tracking estimate unchanged on a rounded basis at +3.5% (qoq ar). [Oct 19 estimate]

From Nomura:

We expect real GDP growth to increase solidly by 3.4% q-o-q saar in Q3 [Oct 19 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2018 is 3.9 percent on October 17, down from 4.0 percent on October 15. [Oct 17 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 2.1% for 2018:Q3 and 2.4% for 2018:Q4. [Oct 19 estimate]

CR Note: It looks like GDP will be in the 3s in Q3.

by Calculated Risk on 10/19/2018 01:25:00 PM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in September in 9 states, higher in 4 states, and stable in 37 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Sixteen states had jobless rate decreases from a year earlier and 34 states and the District had little or no change.
...
Hawaii had the lowest unemployment rate in September, 2.2 percent. The rates in Arkansas (3.5 percent), California (4.1 percent), Idaho (2.7 percent), South Carolina (3.3 percent), Texas (3.8 percent), and Washington (4.4 percent) set new series lows. (All state series begin in 1976.) Alaska had the highest jobless rate, 6.5 percent.
emphasis added

Click on graph for larger image.

This graph shows the number of states (and D.C.) with unemployment rates at or above certain levels since January 1976.

At the worst of the great recession, there were 11 states with an unemployment rate at or above 11% (red).

Currently only one state, Alaska, has an unemployment rate at or above 6% (dark blue).

by Calculated Risk on 10/19/2018 11:19:00 AM

Earlier: NAR: Existing-Home Sales Declined to 5.15 million in September

A few key points:

1) The key for the housing - and the overall economy - is new home sales, single family housing starts and overall residential investment. Overall this is a reasonable level for existing home sales, and the recent weakness is no surprise given the increase in mortgage rates.

2) Inventory is still low, but was up 1.1% year-over-year (YoY) in September. This was the second consecutive year-over-year increase in inventory, and the first YoY increases since May 2015.

3) As usual, housing economist Tom Lawler's forecast was closer to the NAR report than the consensus. See: Lawler: Early Read on Existing Home Sales in September.   The consensus was for sales of 5.30 million SAAR, Lawler estimated the NAR would report 5.20 million SAAR in September, and the NAR actually reported 5.15 million.

Click on graph for larger image.

The current slight YoY increase in inventory is nothing like what happened in 2005 and 2006. In 2005 (see red arrow), inventory kept increasing all year, and that was a sign the bubble was ending.

Although I expect inventory to increase YoY in 2018, I expect inventory to follow the normal seasonal pattern (not keep increasing all year).

Also inventory levels remains low, and could increase significantly and still be at normal levels. No worries.

The second graph shows existing home sales Not Seasonally Adjusted (NSA).

Sales NSA in September (420,000, red column) were well below sales in September 2017 (462,000, NSA), and the lowest for September since 2012.

Sales NSA through September (first nine months) are down about 2.1% from the same period in 2017.

This is a small YoY decline in sales to-date - it is likely that higher mortgage rates are impacting sales, and it is possible there has been an impact from the changes to the tax law (eliminating property taxes write-off, etc).

by Calculated Risk on 10/19/2018 10:10:00 AM

From the NAR: Existing-Home Sales Decline Across the Country in September

Existing-home sales declined in September after a month of stagnation in August, according to the National Association of Realtors®. All four major regions saw no gain in sales activity last month.

Total existing-home sales, which are completed transactions that include single-family homes, townhomes, condominiums and co-ops, fell 3.4 percent from August to a seasonally adjusted rate of 5.15 million in September. Sales are now down 4.1 percent from a year ago (5.37 million in September 2017).
...
Total housing inventory at the end of September decreased from 1.91 million in August to 1.88 million existing homes available for sale, and is up from 1.86 million a year ago. Unsold inventory is at a 4.4-month supply at the current sales pace, up from 4.3 last month and 4.2 months a year ago.
emphasis added

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in September (5.15 million SAAR) were down 3.4% from last month, and were 4.1% below the September 2017 rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 1.88 million in September from 1.91 million in August.   Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory was up 1.1% year-over-year in September compared to September 2017.  

Months of supply was at 4.3 months in September.

As expected by CR readers, sales were below the consensus view. For existing home sales, a key number is inventory - and inventory is still low, but appears to be bottoming. I'll have more later ...

by Calculated Risk on 10/19/2018 08:47:00 AM

A few excerpts from a Merrill Lynch note on house prices:

Home prices nationally, as measured by the S&P CoreLogic Case-Shiller index are running at 6.0% yoy as of the latest data in July. Assuming some modest slowing into the end of the year, we believe we are on track for home prices to end up 5.0% this year, as measured by 4Q/4Q change. As we look ahead into next year, we expect the slowing in home prices to persist, leaving home price appreciation (HPA) of 3% at the end of 2019.
…
Home prices are ultimately anchored to a fair value which is a function of income growth. Based on the OECD’s methodology, we compare nominal Case-Shiller home prices with disposable income per capita, indexed to 100 in 1Q 2000 (Chart 4) which shows the overvaluation during the housing bubble given the irrational exuberance in the market and easy credit conditions. The housing bust left prices to tumble back below fair value. Based on our calculation, prices are once again overvalued on a national level, albeit not nearly as much as during the bubble period. Over time the overvaluation can be solved in two ways: 1) home prices grow at a rate below income for a period of time to close the gap; 2) home prices decline to correct the valuation difference. The pull to fair value can be quite strong.

Click on graph for larger image.

This chart from Merrill Lynch shows their calculation of house prices vs. disposable income.

by Calculated Risk on 10/18/2018 09:01:00 PM

Friday:
• At 10:00 AM ET, Existing Home Sales for September from the National Association of Realtors (NAR). The consensus is for 5.30 million SAAR, down from 5.34 million in August. Housing economist Tom Lawler expects the NAR will report sales of 5.20 million SAAR. Take the under!

A key will be the increase in inventory.

• Also at 10:00 AM: State Employment and Unemployment (Monthly) for September 2018

by Calculated Risk on 10/18/2018 06:18:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

The Arizona Regional Multiple Listing Service (ARMLS) reports ("Stats Report"):

1) Overall sales declined to 6,897 from 7,328 in September 2017. Sales were down 14.2% from August, and down -5.9% from September 2017.

2) Active inventory was at 16,643, down from 17,997 in September 2017.   This is down 7.5% year-over-year.  This is the smallest YoY decrease in almost two years.  In many cities, it appears the inventory decline has ended, but not yet in Phoenix.

This is the twenty-third consecutive month with a YoY decrease in inventory in Phoenix.

Months of supply increased from 2.47 in August to 2.93 in September. This is still low.