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Monday, September 16, 2019

Hotels: Some Analyis of Short Term Rentals; Occupancy Rate Decreased Year-over-year

by Calculated Risk on 9/16/2019 10:14:00 AM

First, some analysis from HotelNewsNow on the impact of short term rentals on hotels: The effects of maturing short-term rentals on US hotels

From HotelNewsNow.com: STR: US hotel results for week ending 7 September

The U.S. hotel industry reported negative year-over-year results in the three key performance metrics during the week of 1-7 September 2019, according to data from STR.

In comparison with the week of 2-8 September 2018, the industry recorded the following:

Occupancy: -1.1% to 61.0%
• Average daily rate (ADR): -1.0% to US$121.37
• Revenue per available room (RevPAR): -2.1% at US$73.97

Reflective of the anticipation of Hurricane Dorian’s landfall, Miami/Hialeah, Florida, reported the steepest decline in RevPAR (-27.0% to US$60.47), due primarily to the largest drop in occupancy (-20.8% to 47.6%). The market registered the second-largest decrease in ADR (-7.9% to US$127.12).

Orlando, Florida, experienced the only other double-digit decline in occupancy (-14.8% to 51.9%) and the third-largest decrease in RevPAR (-13.7% to US$51.13).
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Hotel Occupancy RateClick on graph for larger image.

The red line is for 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

Occupancy has been solid in 2019, and close to-date compared to the previous 4 years.

However occupancy will be lower this year than in 2018 (the record year).

Seasonally, the 4-week average of the occupancy rate will now move sideways until the Fall business travel season.

Data Source: STR, Courtesy of HotelNewsNow.com

NY Fed: Manufacturing "Business activity was little changed in New York State"

by Calculated Risk on 9/16/2019 08:34:00 AM

From the NY Fed: Empire State Manufacturing Survey

Business activity was little changed in New York State, according to firms responding to the September 2019 Empire State Manufacturing Survey. The headline general business conditions index edged down three points to 2.0. New orders were marginally higher than last month, and shipments grew modestly. Delivery times were steady, and inventories increased. Employment levels expanded, while the average workweek held steady.
...
After spending three months in negative territory, the index for number of employees rose to 9.7, pointing to an increase in employment levels, while the average workweek index came in at 1.7, indicating little change in hours worked.

Indexes assessing the six-month outlook suggested that optimism about future conditions waned. The index for future business conditions fell twelve points to 13.7.
emphasis added
This was lower than the consensus forecast.

Sunday, September 15, 2019

Sunday Night Futures

by Calculated Risk on 9/15/2019 07:43:00 PM

Weekend:
Schedule for Week of September 15, 2019

FOMC Preview

Monday:
• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of 4.9, up from 4.8.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 11 and DOW futures are down 88 (fair value).

Note: Oil futures are up about 10% following the attack on the Saudi oil facilities.  Oil prices were up over the last week with WTI futures at $60.84 per barrel and Brent at $67.85 barrel.  A year ago, WTI was at $69, and Brent was at $78 - so oil prices are down about 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.55 per gallon. A year ago prices were at $2.85 per gallon, so gasoline prices are down 30 cents year-over-year.

FOMC Preview

by Calculated Risk on 9/15/2019 09:55:00 AM

The consensus is the FOMC will cut the Fed Funds rate 25 bps to a range of 1.75% to 2.0% at the meeting this week.  A 50 bps cut is not impossible, but seems unlikely at this meeting.

A key will be if the FOMC signals another rate cut in October.  The hints could be in the press conference, or in the dot plot.

Revisions to the economic projections will probably be minor, and the statement will probably be mostly unchanged from July.

Here are the June FOMC projections.

Q1 real GDP growth was at 3.1% annualized, and Q2 at 2.0%.   Currently most analysts are projecting around 1.5% to 2% in Q3.  So the GDP projections will probably be little changed.

GDP projections of Federal Reserve Governors and Reserve Bank presidents
Change in
Real GDP1
201920202021
Jun 20192.0 to 2.21.8 to 2.01.8 to 2.0
Mar 20191.9 to 2.21.8 to 2.01.7 to 2.0
1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.7% in August.  The unemployment rate projection for Q4 2019 will probably be little changed.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents
Unemployment
Rate2
201920202021
Jun 20193.6 to 3.73.6 to 3.93.7 to 4.1
Mar 20193.6 to 3.83.5 to 3.93.6 to 4.0
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of July 2019, PCE inflation was up 1.4% from July 2018.  This was below the projected range for 2019 however it appears inflation has picked up a little recently - and this projection will probably be mostly unchanged.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents
PCE
Inflation1
201920202021
Jun 20191.5 to 1.61.9 to 2.02.0 to 2.1
Mar 20191.8 to 1.92.0 to 2.12.0 to 2.1

PCE core inflation was up 1.6% in July year-over-year.  The projection for core PCE for 2019 will probably be mostly unchanged.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents
Core
Inflation1
201920202021
Jun 20191.7 to 1.81.9 to 2.02.0 to 2.1
Mar 20191.9 to 2.02.0 to 2.12.0 to 2.1

In general the economy has been tracking the June projections.

Saturday, September 14, 2019

Schedule for Week of September 15, 2019

by Calculated Risk on 9/14/2019 08:11:00 AM

The key economic reports this week are August Housing Starts and Existing Home Sales.

For manufacturing, August Industrial Production, and the September New York and Philly Fed surveys, will be released this week.

The FOMC is expected to cut the Fed Funds rate 25bps on Wednesday, and the Fed's Q2 Flow of Funds report will be released on Friday.

----- Monday, Sept 16th -----

8:30 AM ET: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of 4.9, up from 4.8.

----- Tuesday, Sept 17th -----

Industrial Production 9:15 AM: The Fed will release Industrial Production and Capacity Utilization for August.

This graph shows industrial production since 1967.

The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to be unchanged at 77.5%.

10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of  66, unchanged from 66 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.
----- Wednesday, Sept 18th -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

Total Housing Starts and Single Family Housing Starts8:30 AM: Housing Starts for August.

This graph shows single and total housing starts since 1968.

The consensus is for 1.250 million SAAR, up from 1.191 million SAAR.

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

2:00 PM: FOMC Meeting Announcement. The Fed is expected to lower the Fed Funds rate 25bps at this meeting..

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, Sept 19th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 214 thousand initial claims, up from 204 thousand the previous week.

8:30 AM: the Philly Fed manufacturing survey for September. The consensus is for a reading of 11.3, down from 16.8.

Existing Home Sales10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR). The consensus is for 5.38 million SAAR, down from 5.42 million in July.

The graph shows existing home sales from 1994 through the report last month.

----- Friday, Sept 20th -----

10:00 AM: State Employment and Unemployment (Monthly) for August 2019

12:00 PM: Q2 Flow of Funds Accounts of the United States from the Federal Reserve.

Friday, September 13, 2019

"Mortgage Rates' Week Goes From Bad to Worse"

by Calculated Risk on 9/13/2019 05:21:00 PM

From Matthew Graham at MortgageNewsDaily: Mortgage Rates' Week Goes From Bad to Worse

Mortgage rates were already having their worst week since 2016 as of yesterday afternoon. Rather than help to heal some of the damage, today's bond market momentum only made things worse. Whether we're looking at 10yr Treasury yields a broad indicator of longer-term rates or average mortgage lender offerings, this week now ranks among the top 3 in the past decade in terms of the overall move higher. At this point, we'd have to go back to the trauma of 2013's 'taper tantrum' to see anything bigger. [Today's Most Prevalent Rates 30YR FIXED - 3.875%]
Mortgage Rates Click on graph for larger image.

This graph from Mortgage News Daily shows mortgage rates since 2014.

This graph is interactive at the Mortgage News Daily site, and you could view mortgage rates back to the mid-1980s - click here for graph.

Q3 GDP Forecasts: Around 1.5% to 2.0%

by Calculated Risk on 9/13/2019 01:01:00 PM

From Merrill Lynch:

3Q and 2Q GDP tracking remain at 2.0% qoq saar. [Sept 13 estimate]
emphasis added
From Goldman Sachs:
Following this morning’s data, we boosted our Q3 GDP tracking estimate by one tenth to +2.0% (qoq ar). [Sept 13 estimate]
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 1.6% for 2019:Q3 and 1.1% for 2019:Q4. [Sept 13 estimate].
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2019 is 1.8 percent on September 13, down from 1.9 percent on September 11. [Sept 13 estimate]
CR Note: These early estimates suggest real GDP growth will be around 1.5% to 2.0% annualized in Q3.

Sacramento Housing in August: Sales Down 6.5% YoY, Active Inventory DOWN 22% YoY

by Calculated Risk on 9/13/2019 11:15:00 AM

From SacRealtor.org: Median sale price, sales volume decrease for August

August ended with 1,567 sales, a 7.4% decrease from the 1,693 sales last month. Compared to the same month last year (1,676), the current figure is down 6.5%.
...
The Active Listing Inventory increased 1.4% from 2,425 to 2,460 units. The Months of Inventory increased from 1.4 to 1.6 Months. This figure represents the amount of time (in months) it would take for the current rate of sales to deplete the total active listing inventory. [Note: Compared to August 2018, inventory is down 22.3%] .
...
The Median DOM (days on market) increased from 11 to 12 and the Average DOM increased from 23 to 25. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.” Of the 1,567 sales this month, 74.5% (1,167) were on the market for 30 days or less and 89.8% (1,407) were on the market for 60 days or less.
emphasis added
1) Overall sales decreased to 1,567 in August, down from 1,676 in August 2018. Sales were down 7.4% from July 2019 (previous month), and down 6.5% from August 2018.

2) Active inventory was at 2,460, down from 3,167 in August 2018. That is down 22.3% year-over-year.  This is the fourth consecutive YoY decline following 20 months of YoY increases in inventory.

This is a market that didn't pickup in August, even with the recent decline in mortgage rates.  However, most of the decline in mortgage rates were in August, and sales are reported at the close of escrow, so we will probably see a pickup in coming months.

Retail Sales increased 0.4% in August

by Calculated Risk on 9/13/2019 08:40:00 AM

On a monthly basis, retail sales increased 0.4 percent from July to August (seasonally adjusted), and sales were up 4.1 percent from August 2018.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for August 2019, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $526.1 billion, an increase of 0.4 percent from the previous month, and 4.1 percent above August 2018.
emphasis added
Retail Sales Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.5% in August.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Year-over-year change in Retail Sales Retail and Food service sales, ex-gasoline, increased by 4.5% on a YoY basis.

The increase in August was slightly above expectations. Sales in June and July were revised up.  Overall a solid report.

Thursday, September 12, 2019

Friday: Retail Sales

by Calculated Risk on 9/12/2019 10:31:00 PM

Friday:
• At 8:30 AM ET, Retail sales for August will be released.  The consensus is for a 0.3% increase in retail sales.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for September).