Thursday, October 15, 2020

Hotels: Occupancy Rate Declined 29.2% Year-over-year

by Calculated Risk on 10/15/2020 11:31:00 AM

From STR: US hotel results for week ending 10 October

U.S. hotel weekly occupancy hit 50% for just the second time since the low point of the pandemic, according to the latest data from STR through 10 October.

4-10 October 2020 (percentage change from comparable week in 2019):

Occupancy: 50.0% (-29.2%)
• Average daily rate (ADR): US$97.67 (-25.9%)
• Revenue per available room (RevPAR): US$48.85 (-47.5%)

While a handful of the highest occupancy markets were those in areas affected by natural disasters (i.e. California wildfires), Saturday produced the week’s highest occupancy (65.2%) and ADR (US$110.84), indicating that the leisure and weekend staycation demand seen during the summer may make appearances into the fall.
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 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels - before 2020).

So far there has been little business travel pickup that usually happens in the Fall.

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

NMHC: Rent Payment Tracker Shows Households Paying Rent Declined in October

by Calculated Risk on 10/15/2020 11:20:00 AM

From the NMHC: NMHC Rent Payment Tracker Finds 86.8 Percent of Apartment Households Paid Rent as of October 13

The National Multifamily Housing Council (NMHC)’s Rent Payment Tracker found 86.8 percent of apartment households made a full or partial rent payment by October 13 in its survey of 11.5 million units of professionally managed apartment units across the country.

This is a 2.4-percentage point, or 271,000-household decrease from the share who paid rent through October 13, 2019 and compares to 86.2 percent that had paid by September 13, 2020. These data encompass a wide variety of market-rate rental properties across the United States, which can vary by size, type and average rental price.

“While the broader multifamily industry continues to show its resilience at a national level, other metrics in the industry are beginning to highlight the growing localized financial distress due to inaction by political leaders in Washington,” said Doug Bibby, NMHC President.
emphasis added
NMHC Rent Tracker Click on graph for larger image.

This graph from the NMHC Rent Payment Tracker shows the percent of household making full or partial rent payments by the 13th of the month.

CR Note: This is mostly for large, professionally managed properties.  

There has been some decline in households paying rent, but rent payments are not falling off a cliff.

Philly Fed Manufacturing "Picked Up"; NY Fed Manufacturing "Increased Modestly" in October

by Calculated Risk on 10/15/2020 08:52:00 AM

Note: Be careful with diffusion indexes. This shows a rebound off the bottom - some improvement from May to October - but doesn't show the level of activity.

From the Philly Fed: October 2020 Manufacturing Business Outlook Survey

Manufacturing activity in the region picked up this month, according to firms responding to the October Manufacturing Business Outlook Survey. The survey’s current indicators for general activity, new orders, and shipments all showed notable improvement. Most future indexes increased and continue to reflect optimism among firms about growth over the next six months.

The diffusion index for current activity increased 17 points to 32.3 in October, its fifth consecutive positive reading after reaching long-term lows in April and May … On balance, the firms reported increases in manufacturing employment for the fourth consecutive month. The current employment index, however, fell 3 points to 12.7 this month​.
emphasis added
This was above the consensus forecast.

From the NY Fed: Empire State Manufacturing Survey
Business activity expanded modestly in New York State, according to firms responding to the October 2020 Empire State Manufacturing Survey. The headline general business conditions index fell seven points to 10.5, pointing to a slower pace of growth than in September.
The index for number of employees moved up five points to 7.2, indicating that employment levels grew. The average workweek index rose nine points to 16.1, a multi-year high, signaling a significant increase in hours worked.
emphasis added
This was below the consensus forecast.

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

These early reports are mixed, and suggest the ISM manufacturing index might increase slightly in October from the September level.

Weekly Initial Unemployment Claims increase to 898,000

by Calculated Risk on 10/15/2020 08:38:00 AM

Special technical note on California (two week pause).

The DOL reported:

In the week ending October 10, the advance figure for seasonally adjusted initial claims was 898,000, an increase of 53,000 from the previous week's revised level. The previous week's level was revised up by 5,000 from 840,000 to 845,000. The 4-week moving average was 866,250, an increase of 8,000 from the previous week's revised average. The previous week's average was revised up by 1,250 from 857,000 to 858,250.
emphasis added
This does not include the 372,891 initial claims for Pandemic Unemployment Assistance (PUA) that was down from 463,897 the previous week. (There are some questions on PUA numbers).

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 increased to 866,250.

The previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Continued claims decreased to 10,018,000 (SA) from 11,183,000 (SA) last week and will likely stay at a high level until the crisis abates.

Note: There are an additional 11,172,335 receiving Pandemic Unemployment Assistance (PUA) that decreased from 11,394,832 the previous week (there are questions about these numbers). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.

Wednesday, October 14, 2020

Thursday: Unemployment Claims, NY and Philly Fed Mfg

by Calculated Risk on 10/14/2020 09:15:00 PM

• At 8:30 AM ET, The initial weekly unemployment claims report will be released. Initial claims were 840 thousand the previous week.

• Also at 8:30 AM, The New York Fed Empire State manufacturing survey for October. The consensus is for a reading of 15.0, down from 17.0.

• Also at 8:30 AM, the Philly Fed manufacturing survey for October. The consensus is for a reading of 14.5, down from 15.0.

October 14 COVID-19 Test Results

by Calculated Risk on 10/14/2020 07:44:00 PM

The US is now mostly reporting 700 thousand to 1 million 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 (probably close to 1%), 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 949 thousand test results reported over the last 24 hours.

There were 56,727 positive tests.

Almost 9,500 Americans deaths from COVID have been reported in October. 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 6.0% (red line is 7 day average).

For the status of contact tracing by state, check out

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 July high.

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%.

Everyone needs to be vigilant or we might see record high cases this Fall and Winter.

Houston Real Estate in September: Sales Up 32% YoY, Inventory Down 25% YoY

by Calculated Risk on 10/14/2020 02:04:00 PM

From the HAR: Houston Home Sales Stage a September Surge

Houston’s sizzling summer of home sales extended into September as consumers continued to take advantage of historically low mortgage interest rates amid a pandemic. Once again, the high end of the market experienced the greatest increase in sales volume, with mid-range homes also drawing strong activity. The sales frenzy, combined with a steady decline in the number of homes entering the market in recent months, has sent inventory to its lowest level in almost six years, making a sales slowdown inevitable as would-be buyers are left with a narrower selection of homes.

According to the latest Houston Association of Realtors (HAR) Market Update, 9,101 single-family homes sold in September compared to 7,050 a year earlier. That translates to a 29.1 percent increase and marks the fourth straight month of positive sales.
Sales of all property types totaled 11,137 – up 31.9 percent from September 2019. Total dollar volume for the month surged 43.6 percent to $3.4 billion. The lease market cooled in September, with declines in single-family housing while townhouse/condo leases were unchanged year-over-year.
emphasis added
Inventory declined 25.4% year-over-year from 42,959 in September 2019 to 32,047 in September 2020.

Note that the closed sales in September were for contracts that were mostly signed in July and August.

House Prices to National Average Wage Index

by Calculated Risk on 10/14/2020 11:19:00 AM

One of the metrics we'd like to follow is a ratio of house prices to incomes. Unfortunately most income data is released with a significantly lag, and there are always questions about which income data to use (the average total income is skewed by the income of a few people).

And for key measures of house prices - like Case-Shiller - we have indexes, not actually prices.

But we can construct a ratio of the house price indexes to some measure of income.

For this graph I decided to look at house prices and the National Average Wage Index released yesterday for 2019 from Social Security.

House Prices and Wages Click on graph for larger image.

This graph shows the ratio of house price indexes divided by the National Average Wage Index (the Wage index is first divided by 1000).

This uses the annual average National Case-Shiller index since 1976 (and an estimate for 2020).

As of 2020, house prices were somewhat above the median historical ratio - but far below the bubble peak. 

Going forward, I think it would be a positive if wages outpaced, or at least kept pace with house prices increases for a few years.

Note: The national wage index for 2020 is estimated using the median increase over the last several years.

House Prices and Inventory

by Calculated Risk on 10/14/2020 11:01:00 AM

It is difficult to measure housing demand directly, but inventory is fairly easy to track. Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

I don't have a crystal ball, but watching inventory helps understand the housing market.   And inventory has been decreasing in many areas recently, and pushing up house prices.

Existing Home SalesClick on graph for larger image.

This graph below shows existing home months-of-supply (from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999).

There is a clear relationship, and this is no surprise (but interesting to graph).

If months-of-supply is high, prices decline. If months-of-supply is low, prices rise.

For August, the NAR reported months-of-supply at 3.0 months.  This is very low, and based on recent reports, months-of-supply might decrease further in September.  

Note that Case-Shiller is through July.    The recent CoreLogic report indicated prices were up even more in August, and Zillow is forecasting the Case-Shiller Year-over-year House Price Growth to Increase Significantly in August.   

MBA: Mortgage Applications Decrease in Latest Weekly Survey

by Calculated Risk on 10/14/2020 07:00:00 AM

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

Mortgage applications decreased 0.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 9, 2020.

... The Refinance Index decreased 0.3 percent from the previous week and was 44 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 2 percent from one week earlier. The unadjusted Purchase Index decreased 1 percent compared with the previous week and was 24 percent higher than the same week one year ago.

Mortgage applications for refinances and home purchases both decreased slightly last week, despite the 30-year fixed mortgage rate declining to a new MBA survey low of 3.00 percent. Applications for government mortgages offset some of the overall decline by increasing 3 percent, driven by a solid gain in government purchase applications and an 11 percent jump in VA refinance applications,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Refinance and purchase activity continue to run well ahead of last year’s pace, fueled by record-low rates and strong homebuyer demand. Housing supply is a challenge for many aspiring buyers, but activity should continue to stay strong the rest of the year.”
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.00 percent from 3.01 percent, with points decreasing to 0.32 from 0.37 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Refinance IndexClick on graph for larger image.

The first graph shows the refinance index since 1990.

The refinance index has been very volatile recently depending on rates and liquidity.

But with record low rates, the index remains up significantly from last year.

Mortgage Purchase Index The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 24% year-over-year unadjusted.

Note: Red is a four-week average (blue is weekly).