by Calculated Risk on 7/19/2019 10:11:00 AM

From the BLS: Regional and State Employment and Unemployment Summary

Unemployment rates were lower in June in 6 states and stable in 44 states and the District of Columbia, the U.S. Bureau of Labor Statistics reported today. Three states had jobless rate decreases from a year earlier and 47 states and the District had little or no change. The national unemployment rate, 3.7 percent, was little changed from May but was 0.3 percentage point lower than in June 2018.
...
Vermont had the lowest unemployment rate in June, 2.1 percent. The rates in Alabama (3.5 percent), Arkansas (3.5 percent), New Jersey (3.5 percent), and Texas (3.4 percent) set new series lows. (All state series begin in 1976.) Alaska had the highest jobless rate, 6.4 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).  Note that the series low for Alaska is above 6%.  Two states and the D.C. have unemployment rates above 5%; Alaska and Mississippi.

A total of nine states are a series low: Alabama, Arkansas, Iowa, Maine, New Jersey, North Dakota, Pennsylvania, Texas and Vermont.

by Calculated Risk on 7/18/2019 03:33:00 PM

From Compass chief economist Selma Hepp: How did the spur of IPOs impact Bay Area housing markets?

• Higher-end sales surged. While the total number of homes sold in the second quarter trended below last year by about 5 percent, higher-priced sales, above $3 million, surged again bringing second quarter sales in line with last year’s historical peak.

• Home prices remained flat in the second quarter, except in San Francisco and San Mateo. As noted in previous analyses, home prices in the Bay Area reached a cyclical high last May when the median price topped at $1 million. Since, the prices followed seasonal declines reaching the lowest point in January and have increased since.

• For-sale inventory growth slowed considerably. While overall inventory is about 11 percent ahead of last year, inventory growth and addition of new listings has slowed, suggesting that acute lack of homes for sale continues to hang over Bay Area housing markets.

• Lastly, tax reform is likely putting a damper on the market by dragging down sales priced between $1 million and $2 million. While the quarter ended with 5 percent fewer sales than last year, or 876 fewer sales, 84 percent of the decline, or 738 units, was due to fewer homes sold priced between $1 million and $2 million.

by Calculated Risk on 7/18/2019 11:15:00 AM

The National Multifamily Housing Council (NMHC) released their July report: July NMHC Quarterly Survey Finds Strong Ongoing Demand

The enduring strength of the apartment market was the main takeaway of the National Multifamily Housing Council’s Quarterly Survey of Apartment Market Conditions for July 2019, as the Market Tightness (60), Equity Financing (56), and Debt Financing (80) indexes all came in above the breakeven level (50). The Sales Volume Index (48) indicated a continued softness in property sales, albeit with considerable disagreement among respondents.

"These latest figures illustrate that, in spite of construction levels hovering near recent highs, there remains significant pent-up demand for apartments," noted NMHC Chief Economist Mark Obrinsky. "Nearly a third (32 percent) of respondents reported stronger rents and occupancy levels, while just 11 percent indicated looser market conditions."

While the industry outlook is positive, political and regulatory threats like rent control threaten to upend regional markets. Among respondents to the NMHC Quarterly Survey, sixty-two percent operate in jurisdictions that have either recently imposed rent control or is seriously considering doing so. Of this group, a fifth (20 percent) has already cut back on investment or development in these markets, while an additional 60 percent is considering making changes in the future.

The Market Tightness Index increased from 52 to 60, indicating overall improving conditions for the second consecutive quarter. Nearly one-third (32%) of respondents reported tighter market conditions than three months prior, compared to 11 percent who reported looser conditions. Over half (57 percent) of respondents felt that conditions were no different from last quarter.

Click on graph for larger image.

This graph shows the quarterly Apartment Tightness Index. Any reading above 50 indicates tighter conditions from the previous quarter. This indicates market conditions were tighter over the last quarter.

This is the second consecutive reading over 50, following thirteen consecutive quarterly surveys indicating looser conditions.

by Calculated Risk on 7/18/2019 10:39:00 AM

From SacRealtor.org: June sales price inches towards August 2005 high

June closed with 1,527 total sales, a 6.3% [decrease] from the 1,630 sales of May. [Sales down 13.6% YoY]
...
The Active Listing Inventory increased 2.1% from 2,314 to 2,362 units. The Months of Inventory, increased from 1.4 to 1.5 Months. [Note: Compared to June 2018, inventory is down 11.2%] .
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The Median DOM (days on market) remained at 10 from May to June. The Average DOM decreased from 25 to 22. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.”
emphasis added

1) Overall sales decreased to 1,527 in June, down from 1,767 in June 2018. Sales were down 6.3% from May 2019 (last month), and down 13.6% from June 2018.

2) Active inventory was at 2,362, down from 2,660 in June 2018. That is down 11.2% year-over-year.  This is the second consecutive YoY decline following 20 months of YoY increases in inventory.

Inventory is still low - months of inventory is at 1.5 months, probably closer to 4 months would be normal.

by Calculated Risk on 7/18/2019 08:44:00 AM

From the Philly Fed: July 2019 Manufacturing Business Outlook Survey

Manufacturing conditions in the region showed improvement this month, according to firms responding to the July Manufacturing Business Outlook Survey. The survey’s indexes for general activity, new orders, shipments, and employment remained positive and increased from their June readings. Most of the survey’s future activity indexes increased, suggesting improved optimism about growth for the next six months.

The diffusion index for current general activity more than recovered from its decline last month, increasing from 0.3 in June to 21.8 this month.
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The firms reported increases in manufacturing employment and longer workweeks this month. Over 36 percent of the firms reported higher employment, compared with 25 percent last month. Only 6 percent reported decreases in employment this month. The current employment index increased 15 points to 30.0, its highest reading since October 2017.
emphasis added

This was well above the consensus forecast.  Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Click on graph for larger image.

The New York and Philly Fed surveys are averaged together (yellow, through July), and five Fed surveys are averaged (blue, through June) including New York, Philly, Richmond, Dallas and Kansas City. The Institute for Supply Management (ISM) PMI (red) is through June (right axis).

These early reports suggest the ISM manufacturing index will bounce back in July.

by Calculated Risk on 7/18/2019 08:33:00 AM

The DOL reported:

In the week ending July 13, the advance figure for seasonally adjusted initial claims was 216,000, an increase of 8,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 209,000 to 208,000. The 4-week moving average was 218,750, a decrease of 250 from the previous week's revised average. The previous week's average was revised down by 250 from 219,250 to 219,000.
emphasis added

The previous week was revised down.

The following graph shows the 4-week moving average of weekly claims since 1971.

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 decreased to 218,750.

This was close to the consensus forecast.

by Calculated Risk on 7/17/2019 07:52:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 214 thousand initial claims, up from 209 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for July. The consensus is for a reading of 4.5, up from 0.3.

by Calculated Risk on 7/17/2019 04:11:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of San Francisco based on information collected on or before July 8, 2019. "

Economic activity continued to expand at a modest pace overall from mid-May through early July, with little change from the prior reporting period. In most Districts, sales of retail goods increased slightly overall, although vehicle sales were flat. Activity in the nonfinancial services sector rose further. Tourism activity was broadly solid, with Atlanta and Richmond recording robust growth in this sector. Although some Districts continued to report healthy expansion in the transportation sector, others noted that activity declined modestly. On balance, home sales picked up somewhat, but residential construction activity was flat. Nonresidential construction activity increased or remained strong in most reporting Districts, and commercial rents rose. Manufacturing production was generally flat, but a few Districts noted a modest pickup in activity since the last reporting period. Agricultural output declined modestly following unusually heavy rainfall in some areas, and oil and gas production fell somewhat. Increased demand for loans was broad-based, with all but two Districts noting some growth in financing activity. The outlook generally was positive for the coming months, with expectations of continued modest growth, despite widespread concerns about the possible negative impact of trade-related uncertainty.
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On balance, employment grew at a modest pace, slightly slower than the previous reporting period. Labor markets remained tight, with contacts across the country experiencing difficulties filling open positions. The reports noted continued worker shortages across most sectors, especially in construction, information technology, and health care. However, some manufacturing and information technology firms in the Northeast reduced their number of workers. A few reports highlighted concerns about securing and renewing work visas, flagging this as a source of uncertainty for continued employment growth. Compensation grew at a modest-to-moderate pace, similar to the last reporting period, although some contacts emphasized significant increases in entry-level wages. Most District reports also noted that employers expanded benefit packages in response to the tight labor market conditions.
emphasis added

by Calculated Risk on 7/17/2019 03:09:00 PM

The CAR reported: California home sales retreat in June, but 2019 housing market outlook revised upward, C.A.R. reports

After rebounding in May, California home sales fell below the benchmark 400,000 level in June as sales declined from both the previous month and year, the CALIFORNIA ASSOCIATION OF REALTORS® (C.A.R.) said today.

Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 389,690 units in June, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2019 if sales maintained the June pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales.

June’s sales figure was down 4.2 percent from the 406,960 level in May and down 5.1 percent from home sales in June 2018 of 410,800. Sales fell below the 400,000 benchmark again after rebounding in May. Sales have been under the benchmark for 10 of the past 11 months.

“With softer price growth and interest rates at the lowest levels in nearly three years, monthly mortgage payments on a median-priced home have fallen for four straight months. This allows homebuyers to save hundreds of dollars a month on the same home or to potentially consider a slightly more expensive home for the same monthly cost,” said C.A.R. President Jared Martin. “Combined with the long-term benefits of homeownership on personal wealth and quality of life, 2019 is a good time to purchase a home for the long haul.”
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Active listings, which have been decelerating since December 2018, grew 2.4 percent from a year ago — the smallest increase since April 2018.

The number of homes available for sale has moderated significantly, suggesting that market is getting back toward being more balanced between supply and demand — but inventory remains relatively tight from a historical perspective. The Unsold Inventory Index (UII), which is a ratio of inventory over sales, was 3.4 months in June, up from 3.2 months in May and up from 3.0 months in June 2018. The index measures the number of months it would take to sell the supply of homes on the market at the current sales rate.
emphasis added

Here is some inventory data from the NAR and CAR (ht Tom Lawler).   Note that the YoY increase has been slowing in California.

YOY % Change, Existing SF Homes for Sale
	NAR (National)	CAR (California)
Sep-17	-8.4%	-11.2%
Oct-17	-10.4%	-11.5%
Nov-17	-9.7%	-11.5%
Dec-17	-11.5%	-12.0%
Jan-18	-9.5%	-6.6%
Feb-18	-8.6%	-1.3%
Mar-18	-7.2%	-1.0%
Apr-18	-6.3%	1.9%
May-18	-5.1	8.3%
Jun-18	-0.5%	8.1%
Jul-18	0.0%	11.9%
Aug-18	2.1%	17.2%
Sep-18	1.1%	20.4%
Oct-18	2.8%	28%
Nov-18	4.2%	31%
Dec-18	4.8%	30.6%
Jan-19	4.6%	27%
Feb-19	3.2%	19.2%
Mar-19	1.8%	13.4%
Apr-19	1.7%	10.8%
May-19	2.7%	7.4%
Jun-19	NA	2.4%

by Calculated Risk on 7/17/2019 11:24:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Design services demand stalled in June, Project inquiry gains hit a 10-year low

Demand for design services at architecture firms decreased in June in comparison to the previous month, according to a new report today from The American Institute of Architects (AIA).

AIA’s Architecture Billings Index (ABI) score for June was 49.1, which is down from 50.2 in May. Any score below 50 indicates a decrease in billings. Both the project inquiries index and the design contracts index continued to soften in June but remained positive.

“With billings declining or flat for the last five months, it appears that we are settling in for a period of soft demand for design services,” said AIA Chief Economist Kermit Baker, PhD, Hon. AIA. “With the new design contracts score reaching a 10-month low and the project inquiries score hitting a 10-year low, work in the pipeline may start to get worked off, despite current robust backlogs.”
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• Regional averages: South (51.9); West (49.3); Midwest (48.9); Northeast (46.1)

• Sector index breakdown: mixed practice (54.3); commercial/industrial (52.3); institutional (47.0); multi-family residential (46.3)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 49.1 in June, down from 50.2 in May. Anything below 50 indicates contraction in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

According to the AIA, there is an "approximate nine to twelve month lag time between architecture billings and construction spending" on non-residential construction.  This index has been positive for 10 of the previous 12 months, suggesting some further increase in CRE investment in 2019 - but this is the weakest five month stretch since 2012.