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Tuesday, September 29, 2020

Real House Prices and Price-to-Rent Ratio in July

by Calculated Risk on 9/29/2020 02:23:00 PM

Here is the post earlier on Case-Shiller: Case-Shiller: National House Price Index increased 4.8% year-over-year in July

It has been over fourteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index (SA), was reported as being 18.6% above the previous bubble peak. However, in real terms, the National index (SA) is still about 4% below the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 12% below the bubble peak.

The year-over-year growth in prices increased to 4.8% nationally.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $289,000 today adjusted for inflation (45%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

Nominal House PricesThe first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through June) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).



Real House Prices

Real House PricesThe second graph shows the same two indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to June 2005 levels, and the Composite 20 index is back to November 2004.

In real terms, house prices are at 2004/2005 levels.

Note that inflation was negative for a few months earlier this year, and that boosted real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Price-to-Rent RatioHere is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0). The price-to-rent ratio has been moving sideways recently.

On a price-to-rent basis, the Case-Shiller National index is back to March 2004 levels, and the Composite 20 index is back to November 2003 levels.

In real terms, prices are back to late 2004/2005 levels, and the price-to-rent ratio is back to late 2003, early 2004.

"Chemical Activity Barometer Rises in September"

by Calculated Risk on 9/29/2020 11:12:00 AM

Note: This appears to be a leading indicator for industrial production.

From the American Chemistry Council: Chemical Activity Barometer Rises in September

The Chemical Activity Barometer (CAB), a leading economic indicator created by the American Chemistry Council (ACC), rose 1.6 percent in September on a three-month moving average (3MMA) basis following a 2.7 percent gain in August. On a year-over-year (Y/Y) basis, the barometer was down 4.3 percent in September.

The unadjusted data show a 0.7 percent gain in September following a 2.2 percent gain in August and a 1.9 percent gain in July. The diffusion index rose from 35 percent to 65 percent in September. The diffusion index marks the number of positive contributors relative to the total number of indicators monitored. The CAB reading for August was revised upward by 0.89 points and that for July was revised upward by 0.42 points.

“With five consecutive months of gains, the September CAB reading is consistent with recovery in the U.S. economy,” said Kevin Swift, chief economist at ACC.
...
Applying the CAB back to 1912, it has been shown to provide a lead of two to 14 months, with an average lead of eight months at cycle peaks as determined by the National Bureau of Economic Research. The median lead was also eight months. At business cycle troughs, the CAB leads by one to seven months, with an average lead of four months. The median lead was three months. The CAB is rebased to the average lead (in months) of an average 100 in the base year (the year 2012 was used) of a reference time series. The latter is the Federal Reserve’s Industrial Production Index.
emphasis added
Chemical Activity Barometer Click on graph for larger image.

This graph shows the year-over-year change in the 3-month moving average for the Chemical Activity Barometer (CAB) compared to Industrial Production.

Although the CAB (red) generally leads Industrial Production (blue), they both collapsed together with the sudden stop of the economy in March. The increases in the CAB suggest further increases in Industrial Production, but still a large year-over-year decline.

Case-Shiller: National House Price Index increased 4.8% year-over-year in July

by Calculated Risk on 9/29/2020 09:21:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for July ("July" is a 3 month average of May, June and July prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P: S&P CoreLogic Case-Shiller Index Reports 4.8% Annual Home Price Gain in July

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.8% annual gain in July, up from 4.3% in the previous month. The 10-City Composite annual increase came in at 3.3%, up from 2.8% in the previous month. The 20-City Composite posted a 3.9% year-over-year gain, up from 3.5% in the previous month.

Phoenix, Seattle and Charlotte reported the highest year-over-year gains among the 19 cities (excluding Detroit) in July. Phoenix led the way with a 9.2% year-over-year price increase, followed by Seattle with a 7.0% increase and Charlotte with a 6.0% increase. Sixteen of the 19 cities reported higher price increases in the year ending July 2020 versus the year ending June 2020.
...
The National Index posted a 0.8% month-over-month increase, while the 10-City and 20-City Composites both posted increases of 0.6% before seasonal adjustment in July. After seasonal adjustment, the National Index posted a month-over-month increase of 0.4%, while the 10-City and 20- City Composites posted increases of 0.5% and 0.6%, respectively. In July, 18 of 19 cities (excluding Detroit) reported increases before seasonal adjustment, while 18 of the 19 cities reported increases after seasonal adjustment.

“Housing prices rose in July,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P Dow Jones Indices. “The National Composite Index gained 4.8% relative to its level a year ago, slightly ahead of June’s 4.3% increase. The 10- and 20-City Composites (up 3.3% and 3.9%, respectively) also rose at an accelerating pace in July compared to June. The strength of the housing market was consistent nationally – all 19 cities for which we have July data rose, with 16 of them outpacing their June gains.

“In previous months, we’ve noted that a trend of accelerating increases in the National Composite Index began in August 2019. That trend was interrupted in May and June, as price gains decelerated modestly, but now may have resumed. Obviously more data will be required before we can say with confidence that any COVID-related deceleration is behind us.
emphasis added
Case-Shiller House Prices Indices Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 4.3% from the bubble peak, and up 0.5% in July (SA) from June.

The Composite 20 index is 8.7% above the bubble peak, and up 0.6% (SA) in July.

The National index is 18.6% above the bubble peak (SA), and up 0.4% (SA) in July.  The National index is up 60% from the post-bubble low set in December 2011 (SA).

Case-Shiller House Prices Indices The second graph shows the Year over year change in all three indices.

The Composite 10 SA is up 3.3% compared to July 2019.  The Composite 20 SA is up 4.0% year-over-year.

The National index SA is up 4.8% year-over-year.

Note: According to the data, prices increased in 18 cities month-over-month seasonally adjusted.

Price increases were slightly above expectations.  I'll have more later.

Monday, September 28, 2020

Tuesday: Case-Shiller House Prices

by Calculated Risk on 9/28/2020 08:50:00 PM

Tuesday:
• At 9:00 AM ET: S&P/Case-Shiller House Price Index for July. The consensus is for a 3.8% year-over-year increase in the Comp 20 index for July.

September 28 COVID-19 Test Results

by Calculated Risk on 9/28/2020 07:11:00 PM

The US is now mostly reporting over 700,000 tests per day. Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 960,631 test results reported over the last 24 hours.

There were 36,741 positive tests.

Over 21,000 Americans have died from COVID so far in September. See the graph on US Daily Deaths here.

COVID-19 Tests per Day Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 3.8% (red line is 7 day average).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

COVID-19 Positive Tests per DayThe second graph shows the 7 day average of positive tests reported.

The dashed line is the June low.

Note that there were very few tests available in March and April, and many cases were missed (the percent positive was very high - see first graph). By June, the percent positive had dropped below 5%.

If people stay vigilant, the number of cases might drop to the June low some time in October (that would still be a large number of new cases, but progress).

MBA Survey: "Share of Mortgage Loans in Forbearance Declines to 6.87%"

by Calculated Risk on 9/28/2020 04:05:00 PM

Note: This is as of September 20th.

From the MBA: Share of Mortgage Loans in Forbearance Declines to 6.87%

The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 6 basis points from 6.93% of servicers’ portfolio volume in the prior week to 6.87% as of September 20, 2020. According to MBA’s estimate, 3.4 million homeowners are in forbearance plans.
...
“The share of loans in forbearance continues to decline and is now at a level not seen since mid-April. Many homeowners with GSE loans are exiting forbearance into a deferral plan and resuming their original mortgage payment, but waiting to pay the forborne amount until the end of the loan,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “However, the overall picture is still somewhat of a mixed bag. The recent uptick in forbearance requests, particularly for those with FHA or VA loans, is leaving the Ginnie Mae share elevated, as the pace of new requests meets or exceeds the pace of exits.”

Added Fratantoni, “The continued churn in the job market is likely keeping many homeowners who have been in forbearance reluctant to exit, given the level of economic uncertainty.”
...
By stage, 30.26% of total loans in forbearance are in the initial forbearance plan stage, while 68.37% are in a forbearance extension. The remaining 1.37% are forbearance re-entries.
emphasis added
MBA Forbearance Survey Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  Most of the increase was in late March and early April, and has been trending down for the last few months.

The MBA notes: "Total weekly forbearance requests as a percent of servicing portfolio volume (#) increased relative to the prior week: from 0.10% to 0.11%"

There hasn't been a pickup in forbearance activity related to the end of the extra unemployment benefits.

New Home Prices

by Calculated Risk on 9/28/2020 01:57:00 PM

As part of the new home sales report released last week, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in August 2020 was $312,800. The average sales price was $369,000."

The following graph shows the median and average new home prices.

New Home Prices Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

The average price in August 2020 was $369,000, down 0.8% from July, and down 8.4% from the peak in 2017.  The median price was $312,800, down 4.6% from July, and down 8.9% from the peak in 2017.

The average and median house prices have mostly moved sideways since 2017 due to home builders offering more lower priced homes.

The second graph shows the percent of new homes sold by price.

New Home Sales by PriceVery few new homes sold were under $150K in August 2020 ("Less than 500 units" in August 2020, rounded down to zero).  This is down from 30% in 2002.  In general, the under $150K bracket is going away.   

The $400K+ bracket increased significantly since the housing recovery started, but has been holding steady recently - and declined over the last year.  A majority of new homes (about 66%) in the U.S., are in the $200K to $400K range.

Dallas Fed: "Texas Manufacturing Recovery Picks Up Steam" in September

by Calculated Risk on 9/28/2020 10:40:00 AM

From the Dallas Fed: Texas Manufacturing Recovery Picks Up Steam

Texas factory activity expanded in September for the fourth month in a row following a record contraction due to the COVID-19 pandemic, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, rose nine points to 22.3, its highest reading in two years.

Other measures of manufacturing activity point to above-average growth this month. The new orders index advanced five points to 14.7, and the growth rate of orders index held fairly steady at 13.2. The capacity utilization index rose from 10.9 to 17.5, while the shipments index was largely unchanged at 21.5.

Perceptions of broader business conditions continued to improve in September. The general business activity index pushed up six points to 13.6, its highest reading since November 2018. The company outlook index held mostly steady at 14.9, a reading well above average. Uncertainty regarding companies’ outlooks continued to rise, with the index positive but largely unchanged at 6.7.

Labor market measures indicated stronger employment growth and a continued increase in workweek length. The employment index pushed up from 10.6 to 14.5, suggesting more robust hiring.
emphasis added
This was the last of the regional Fed surveys for September.

Here is a graph comparing the regional Fed surveys and the ISM manufacturing index:

Fed Manufacturing Surveys and ISM PMI Click on graph for larger image.

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

The ISM manufacturing index for September will be released on Thursday, October 1st. The consensus is for the ISM to be at 56.2, up from 56.0 in August. Based on these regional surveys, the ISM manufacturing index will likely increase in September from the August level.

Note that these are diffusion indexes, so readings above 0 (or 50 for the ISM) means activity is increasing (it does not mean that activity is back to pre-crisis levels).

Seven High Frequency Indicators for the Economy

by Calculated Risk on 9/28/2020 08:15:00 AM

These indicators are mostly for travel and entertainment - some of the sectors that will recover very slowly.

----- Airlines: Transportation Security Administration -----

The TSA is providing daily travel numbers.

TSA Traveler Data Click on graph for larger image.

This data shows the seven day average of daily total traveler throughput from the TSA for 2019 (Blue) and 2020 (Red).

The dashed line is the percent of last year for the seven day average.

This data is as of September 27th.

The seven day average is down 68% from last year (32% of last year).

There has been a slow increase from the bottom.

----- Restaurants: OpenTable -----

The second graph shows the 7 day average of the year-over-year change in diners as tabulated by OpenTable for the US and several selected cities.

Move Box OfficeThanks to OpenTable for providing this restaurant data:

This data is updated through September 26, 2020.

This data is "a sample of restaurants on the OpenTable network across all channels: online reservations, phone reservations, and walk-ins. For year-over-year comparisons by day, we compare to the same day of the week from the same week in the previous year."

Note that this data is for "only the restaurants that have chosen to reopen in a given market". Since some restaurants have not reopened, the actual year-over-year decline is worse than shown.

The 7 day average for New York is still off 63% YoY, and down 33% in Arizona.  There was a surge in restaurant dining around Labor Day - hopefully mostly outdoor dining.

----- Movie Tickets: Box Office Mojo -----

Move Box OfficeThis data shows domestic box office for each week (red) and the maximum and minimum for the previous four years.  Data is from BoxOfficeMojo through September 24th.

Note that the data is usually noisy week-to-week and depends on when blockbusters are released.

Movie ticket sales have picked up over the last few weeks, and were at $9 million last week (compared to usually under $200 million per week in the late Summer / early Fall).

Some movie theaters are reopening (probably with limited seating at first).  

----- Hotel Occupancy: STR -----

Hotel Occupancy RateThis graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

The red line is for 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels - prior to 2020).

This data is through September 19th.

Hotel occupancy is currently down 31.9% year-over-year (and that is boosted by fires and a hurricane).

Notes: Y-axis doesn't start at zero to better show the seasonal change.

The leisure travel season usually peaks at the beginning of August, and then the occupancy rate typically declines sharply in the Fall.  With so many schools closed, the leisure travel season might have lasted longer than usual this year, but it is unlikely business travel will pickup significantly in the Fall.

----- Gasoline Supplied: Energy Information Administration -----

gasoline ConsumptionThis graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows gasoline supplied compared to the same week last year of .

At one point, gasoline supplied was off almost 50% YoY.

As of September 19th, gasoline supplied was only off about 8.9% YoY (about 91.1% of normal).

Note: I know several people that have driven to vacation spots - or to visit family - and they usually would have flown.   So this might have boosted gasoline consumption and the expense of air travel.

----- Transit: Apple Mobility -----

This graph is from Apple mobility. From Apple: "This data is generated by counting the number of requests made to Apple Maps for directions in select countries/regions, sub-regions, and cities." This is just a general guide - people that regularly commute probably don't ask for directions.

There is also some great data on mobility from the Dallas Fed Mobility and Engagement Index. However the index is set "relative to its weekday-specific average over January–February", and is not seasonally adjusted, so we can't tell if an increase in mobility is due to recovery or just the normal increase in the Spring and Summer.

Apple Mobility Data This data is through September 25th for the United States and several selected cities.

The graph is the running 7 day average to remove the impact of weekends.

IMPORTANT: All data is relative to January 13, 2020. This data is NOT Seasonally Adjusted. People walk and drive more when the weather is nice, so I'm just using the transit data.

According to the Apple data directions requests, public transit in the 7 day average for the US is still only about 58% of the January level. It is at 51% in Los Angeles, and 58% in Houston.

----- New York City Subway Usage -----

Here is some interesting data on New York subway usage (HT BR).

New York City Subway UsageThis graph is from Todd W Schneider.

This data is through Friday, September 25th.

Schneider has graphs for each borough, and links to all the data sources.

He notes: "Data updates weekly from the MTA’s public turnstile data, usually on Saturday mornings".

Sunday, September 27, 2020

Sunday Night Futures

by Calculated Risk on 9/27/2020 07:31:00 PM

Weekend:
Schedule for Week of September 27, 2020

Monday:
• At 10:30 AM ET, Dallas Fed Survey of Manufacturing Activity for September. This is the last of the regional surveys for September.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 9 and DOW futures are up 89 (fair value).

Oil prices were down over the last week with WTI futures at $40.19 per barrel and Brent at $41.91 barrel. A year ago, WTI was at $58, and Brent was at $65 - so WTI oil prices are down about 30% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.18 per gallon. A year ago prices were at $2.65 per gallon, so gasoline prices are down $0.47 per gallon year-over-year.