Sunday, May 02, 2021

Goldman on Housing: Double-digit price gains in 2021 and 2022

by Calculated Risk on 5/02/2021 11:00:00 PM

A few brief excerpts from a Goldman Sachs research note on housing:

Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. ... consumer surveys indicate that household buying intentions are now the highest in 20 years. ... mortgage lending standards have remained fairly tight. With demographic trends still strong, mortgage rates very low, housing affordability still high, and household wealth as a share of income at the highest level in US history, demand should remain strong.

The supply picture offers no quick fixes to the shortage of available homes ... The resulting picture is one of a persistent supply-demand imbalance in the years ahead. ... [Our] model suggests that rising prices will only gradually reduce affordability enough to dampen demand and mitigate the supply-demand imbalance. As a result, the model projects double-digit price gains both this year and next.

Monday: ISM Mfg, Construction Spending, Vehicle Sales and More

by Calculated Risk on 5/02/2021 06:29:00 PM

Weekend:
Schedule for Week of May 2, 2021

Q1 2021 GDP Details on Residential and Commercial Real Estate

Monday:
• At 10:00 AM ET, ISM Manufacturing Index for April. The consensus is for the ISM to be at 65.0, up from 64.7 in March.

• Also at 10:00 AM, Construction Spending for March. The consensus is for a 2.0% increase in construction spending.

• All day, Light vehicle sales for April. The expectation is for light vehicle sales to be 17.9 million SAAR in April, unchanged from 17.85 million in March (Seasonally Adjusted Annual Rate).

• At 2:00 PM, Senior Loan Officer Opinion Survey on Bank Lending Practices for April.

• At 2:20 PM, Speech, Fed Chair Jerome Powell, Community Development, At the National Community Reinvestment Coalition’s 2021 Just Economy Conference (via livestream)

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 10, and DOW futures are up 68 (fair value).

Oil prices were up over the last week with WTI futures at $63.56 per barrel and Brent at $66.73 per barrel. A year ago, WTI was at $20, and Brent was at $18 - so WTI oil prices are UP sharply year-over-year (oil prices collapsed at the beginning of the pandemic).

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.89 per gallon. A year ago prices were at $1.75 per gallon, so gasoline prices are up $1.14 per gallon year-over-year.

Q1 2021 GDP Details on Residential and Commercial Real Estate

by Calculated Risk on 5/02/2021 08:11:00 AM

The BEA released the underlying details for the Q1 advance GDP report on Friday.

The BEA reported that investment in non-residential structures decreased at a 4.8% annual pace in Q1. This was the sixth consecutive quarterly decline (weakness in non-residential structures started before the pandemic).  

Investment in petroleum and natural gas structures increased sharply in Q1 compared to Q4, but was still down 40% year-over-year.  

Office Investment as Percent of GDPClick on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices (blue) decreased in Q1, and was down 4.5% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 28% year-over-year in Q1 - and at a record low as a percent of GDP.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment decreased in Q1, and lodging investment was down 22% year-over-year.


All three sectors - offices, malls, and hotels - are being hurt significantly by the pandemic.

Residential Investment Components The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Even though investment in single family structures has increased from the bottom, single family investment is still low, and still barely above the bottom for previous recessions as a percent of GDP.

Investment in single family structures was $375 billion (SAAR) (about 1.7% of GDP), and up 22% year-over-year.

Investment in multi-family structures increased slightly in Q1.

Investment in home improvement was at a $325 billion Seasonally Adjusted Annual Rate (SAAR) in Q3 (about 1.5% of GDP).  Home improvement spending has been strong during the pandemic.

Note that Brokers' commissions (black) increased sharply as existing home sales increased in the second half of 2020, and was up 26% year-over-year in Q1.

Saturday, May 01, 2021

May 1st COVID-19 Vaccinations, New Cases, Hospitalizations; Fewest Monthly Deaths Since March 2020

by Calculated Risk on 5/01/2021 08:09:00 PM

Note: I'm looking forward to not posting this daily! I've been posting this data daily for over a year, and I'll stop once all three of these criteria are met:
1) 70% of the population over 18 has had at least one dose of vaccine, and
2) new cases are under 5,000 per day, and
3) hospitalizations are below 3,000.

According to the CDC, 243.5 million doses have been administered. 39.8% of the population over 18 is fully vaccinated, and 55.8% of the population over 18 has had at least one dose (144.2 million people over 18 have had at least one dose).

And check out COVID Act Now to see how each state is doing. 


20,279 US deaths were reported in April due to COVID - the fewest since March 2020.

COVID-19 Positive Tests per DayClick on graph for larger image.

This graph shows the daily (columns) 7 day average (line) of positive tests reported.

Note: The ups and downs during the Winter surge were related to reporting delays due to the Thanksgiving and Christmas holidays.

This data is from the CDC.

The 7-day average is 50,514, down from 51,782 yesterday, and down from the recent peak of 69,881 on April 13, 2021. This is the lowest since October 11, 2020, but well above the post-summer surge low of 34,668.

The second graph shows the number of people hospitalized.

COVID-19 HospitalizedThis data is also from the CDC.

The CDC cautions that due to reporting delays, the area in grey will probably increase.

The current 7-day average is 36,304, down from 36,716 reported yesterday, but well above the post-summer surge low of 23,000.

Schedule for Week of May 2, 2021

by Calculated Risk on 5/01/2021 08:11:00 AM

The key report scheduled for this week is the April employment report.

Other key reports include April vehicle sales, and the March trade balance.

For manufacturing, the April ISM manufacturing index will be released.

----- Monday, May 3rd -----

10:00 AM: ISM Manufacturing Index for April. The consensus is for the ISM to be at 65.0, up from 64.7 in March.

10:00 AM: Construction Spending for March. The consensus is for a 2.0% increase in construction spending.

Vehicle SalesAll day: Light vehicle sales for April. The expectation is for light vehicle sales to be 17.9 million SAAR in April, unchanged from 17.85 million in March (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the sales rate for the previous month.

2:00 PM: Senior Loan Officer Opinion Survey on Bank Lending Practices for April.

2:20 PM, Speech, Fed Chair Jerome Powell, Community Development, At the National Community Reinvestment Coalition’s 2021 Just Economy Conference (via livestream)

----- Tuesday, May 4th -----

8:00 AM ET: Corelogic House Price index for March.

U.S. Trade Deficit8:30 AM: Trade Balance report for March from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $74.0 billion.  The U.S. trade deficit was at $71.1 Billion in February.

----- Wednesday, May 5th -----

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

8:15 AM: The ADP Employment Report for April. This report is for private payrolls only (no government). The consensus is for 830,000 payroll jobs added in April, up from 517,000 added in March.

10:00 AM: the ISM Services Index for April.   The consensus is for a reading of 64.3, up from 63.7.

----- Thursday, May 6th -----

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for a decrease to 525 thousand from 553 thousand last week.

----- Friday, May 7th -----

Employment Recessions, Scariest Job Chart8:30 AM: Employment Report for April.   The consensus is for 978,000 jobs added, and for the unemployment rate to decrease to 5.7%.

There were 916,000 jobs added in March, and the unemployment rate was at 6.0%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms, and is now slightly better than the worst of the "Great Recession".

Friday, April 30, 2021

Fannie Mae: Mortgage Serious Delinquency Rate Decreased in March

by Calculated Risk on 4/30/2021 04:27:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency decreased to 2.58% in March, from 2.76% in February. The serious delinquency rate is up from 0.66% in March 2020.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble, and peaked at 3.32% in August 2020 during the pandemic.

Fannie Freddie Seriously Delinquent RateClick on graph for larger image

By vintage, for loans made in 2004 or earlier (2% of portfolio), 5.66% are seriously delinquent (down from 5.90% in February). For loans made in 2005 through 2008 (2% of portfolio), 9.65% are seriously delinquent (down from 10.01%), For recent loans, originated in 2009 through 2021 (96% of portfolio), 2.13% are seriously delinquent (down from 2.29%). So Fannie is still working through a few poor performing loans from the bubble years.

Mortgages in forbearance are counted as delinquent in this monthly report, but they will not be reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once they are employed.

Note: Freddie Mac reported earlier.

April 30th COVID-19 Vaccinations, New Cases, Hospitalizations; Lowest 7-Day Average New Cases Since October 2020

by Calculated Risk on 4/30/2021 03:56:00 PM

Note: I'm looking forward to not posting this daily! I've been posting this data daily for over a year, and I'll stop once all three of these criteria are met:
1) 70% of the population over 18 has had at least one dose of vaccine, and
2) new cases are under 5,000 per day, and
3) hospitalizations are below 3,000.

According to the CDC, 240.2 million doses have been administered. 39.0% of the population over 18 is fully vaccinated, and 55.4% of the population over 18 has had at least one dose (142.9 million people over 18 have had at least one dose).

And check out COVID Act Now to see how each state is doing. 


Almost 19,500 US deaths were reported so far in April due to COVID.

COVID-19 Positive Tests per DayClick on graph for larger image.

This graph shows the daily (columns) 7 day average (line) of positive tests reported.

Note: The ups and downs during the Winter surge were related to reporting delays due to the Thanksgiving and Christmas holidays.

This data is from the CDC.

The 7-day average is 51,736, down from 52,528 yesterday, and down from the recent peak of 69,881 on April 13, 2021. This is the lowest since October 12, 2020, but well above the post-summer surge low of 34,668.

The second graph shows the number of people hospitalized.

COVID-19 HospitalizedThis data is also from the CDC.

The CDC cautions that due to reporting delays, the area in grey will probably increase.

The current 7-day average is 36,716, down from 37,226 reported yesterday, and well above the post-summer surge low of 23,000.

Early Q2 GDP Forecasts: 10%

by Calculated Risk on 4/30/2021 12:19:00 PM

From Goldman Sachs:

We launched our Q2 GDP tracking estimate at +10.5% (qoq ar). [Apr 30 estimate]
emphasis added
From the NY Fed Nowcasting Report
The New York Fed Staff Nowcast stands at 5.3% for 2021:Q2. [Apr 30 estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2021 is 10.4 percent on April 30. [Apr 30 estimate]

Real Personal Income less Transfer Payments

by Calculated Risk on 4/30/2021 10:29:00 AM

Government transfer payments increased sharply in March compared to February, and were $4.8 trillion (on SAAR basis) above the February 2020 level (pre-pandemic).  Most of the increase in transfer payments - compared to the levels prior to the crisis - is from unemployment insurance and "other" (includes direct payments). 

This table shows the amount of unemployment insurance and "Other" transfer payments since February 2020 (pre-crisis level).  The increase in "Other" was mostly due to parts of the relief acts including direct payments.


There was a large increase in "Other" in March due to the American Rescue Plan Act.

Selected Transfer Payments
Billions of dollars, SAAR
OtherUnemployment
Insurance
Feb-20$506$28
Mar-20$515$74
Apr-20$3,379$493
May-20$1,360$1,356
Jun-20$758$1,405
Jul-20$760$1,331
Aug-20$692$636
Sep-20$936$359
Oct-20$732$304
Nov-20$620$281
Dec-20$654$304
Jan-21$2,357$556
Feb-21$782$535
Mar-21$4,751$541

A key measure of the health of the economy (Used by NBER in recession dating) is Real Personal Income less Transfer payments.

Real Personal Income less Transfer payments Click on graph for larger image.

This graph shows real personal income less transfer payments since 1990.

This measure of economic activity increased 0.9% in March, compared to February, and was down 1.2% compared to February 2020 (previous peak).

Recession Measure IncomeAnother way to look at this data is as a percent of the previous peak.

Real personal income less transfer payments was off 8.1% in April 2020. That was a larger decline than the worst of the great recession.

Currently personal income less transfer payments are still off 1.2% (dashed line).

Black Knight: Number of Homeowners in COVID-19-Related Forbearance Plans Increased Slightly

by Calculated Risk on 4/30/2021 10:10:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of April 27th.

From Black Knight: A Jump in Portfolio/Pls Forbearances Breaks Eight-Week Improvement Streak

New data from our McDash Flash Forbearance Tracker showed an increase in forbearance volumes for the first time in nine weeks. Mid-month increases have been relatively common in recent months, and despite the 20,000 weekly increase in forbearance plans, plan volumes are still down 228,000 (-8.9%) from the same time last month.

We saw continued improvement among GSE (-9,000) and FHA/VA forbearances (-2,000), but these decreases were more than offset by an increase of 31,000 forbearance plans among portfolio-held and privately securitized mortgages.

Black Knight ForbearanceClick on graph for larger image.

More than 200,000 plans are still set to expire in April. With less than a week remaining in the month, the opportunity still remains for additional improvement in late April/early May. As of April 27, there are 2.33 million (4.4% of) homeowners in COVID-19 related forbearance plans, including 2.6% of GSE, 7.8% of FHA/VA and 5% of portfolio/PLS loans.

With the large amount of plans up for review in the next week, it’ll be worth watching these numbers going into May. We’ll have another update here on our blog next Friday, May 7.

emphasis added