by Calculated Risk on 8/19/2021 11:33:00 AM

Note: The year-over-year occupancy comparisons are easy, since occupancy declined sharply at the onset of the pandemic.  So STR is comparing to the same week in 2019.

The occupancy rate is down 8.3% compared to the same week in 2019.

From CoStar: STR: Seasonal Demand Trends Weigh Down Weekly US Hotel Occupancy

U.S. hotel occupancy and average daily rate (ADR) dipped from previous weeks, according to STR‘s latest data through August 14.

August 8-14, 2021 (percentage change from comparable week in 2019*):

• Occupancy: 65.7% (-8.4%)
• Average daily rate (ADR): $139.18 (+5.9%)
• Revenue per available room (RevPAR): $91.45 (-3.0%)

While the metrics were down week over week, comparisons with 2019 remained consistent, which is further evidence of seasonality in the data as more schools return to class and leisure demand wanes. Concern around COVID-19 cases also persists.
...
*Due to the steep, pandemic-driven performance declines of 2020, STR is measuring recovery against comparable time periods from 2019.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

Click on graph for larger image.

The red line is for 2021, black is 2020, blue is the median, dashed purple is 2019, and dashed light blue is for 2009 (the worst year on record for hotels prior to 2020).

Occupancy is well above the horrible 2009 levels and weekend occupancy (leisure) has been solid - but, according to STR, is starting to "wane" seasonally.

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

With solid leisure travel, the Summer months had decent occupancy - but it is uncertain what will happen in the Fall with business travel - especially with the sharp increase in COVID pandemic cases and hospitalizations.

by Calculated Risk on 8/19/2021 10:39:00 AM

From the MBA: Mortgage Delinquencies Decrease in the Second Quarter of 2021

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 5.47 percent of all loans outstanding at the end of the second quarter of 2021, according to the Mortgage Bankers Association's (MBA) National Delinquency Survey.

For the purposes of the survey, MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage. The delinquency rate was down 91 basis points from the first quarter of 2021 and down 275 basis points from one year ago.

"Mortgage delinquencies across all loan types - conventional, FHA, and VA - reached their lowest levels since the first quarter of 2020," said Marina Walsh, CMB, MBA's Vice President of Industry Analysis. "The drop in the delinquency rate for FHA loans and VA loans was the largest quarterly decline for both in the history of MBA's survey dating back to 1979."
...
Walsh added, "Much of the second-quarter improvement can be traced to later-stage delinquent loans - those 90 days or past due, but not in foreclosure. In fact, the 90-day delinquency rate dropped by 72 basis points, which is another record decline in the survey. It appears that borrowers in later stages of delinquency are recovering due to several factors, including improved employment and other economic conditions, the availability of home retention workout options after forbearance, and a strong housing market that is bringing additional alternatives to distressed homeowners."

Walsh noted that foreclosure moratoria were still in place through the second quarter, resulting in the lowest foreclosure inventory recorded since 1981.

"Once the foreclosure moratoria lift, and forbearance plans expire over the course of the next several months, we expect many homeowners to take advantage of available workout options to avoid the foreclosure process," said Walsh.
emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.  Overall delinquencies decreased in Q2.

From the MBA:

Compared to the first quarter of 2021, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding. By stage, the 30-day delinquency rate decreased 5 basis points to 1.41 percent and the 60-day delinquency rate decreased 15 basis points to 0.52 percent, both at their lowest levels in the history of the survey. The 90-day delinquency bucket decreased 72 basis points to 3.53 percent.
...
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 0.51 percent, down 3 basis points from the first quarter of 2021 and 17 basis points lower than one year ago. This is the lowest foreclosure inventory rate since the fourth quarter of 1981. The percentage of loans on which foreclosure actions were started in the second quarter remained unchanged from last quarter at 0.04 percent.

This sharp increase last year in the 90-day bucket was due to loans in forbearance (included as delinquent, but not reported to the credit bureaus).

The percent of loans in the foreclosure process declined further, and was at the lowest level since 1981.

by Calculated Risk on 8/19/2021 08:35:00 AM

The DOL reported:

In the week ending August 14, the advance figure for seasonally adjusted initial claims was 348,000, a decrease of 29,000 from the previous week's revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000. The previous week's level was revised up by 2,000 from 375,000 to 377,000. The 4-week moving average was 377,750, a decrease of 19,000 from the previous week's revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week's average was revised up by 500 from 396,250 to 396,750.
emphasis added

This does not include the 109,379 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 103,847 the previous week.

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 377,750.

The previous week was revised up.

Regular state continued claims decreased to 2,820,000 (SA) from 2,899,000 (SA) the previous week.

Note: There are an additional 4,877,668 receiving Pandemic Unemployment Assistance (PUA) that increased from 4,820,787 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.  And an additional 3,786,488 receiving Pandemic Emergency Unemployment Compensation (PEUC) down from 3,852,569.

Weekly claims were below the consensus forecast.

by Calculated Risk on 8/18/2021 09:00:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for a decrease to 360 thousand from 375 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for August. The consensus is for a reading of 25.0, up from 21.9.

by Calculated Risk on 8/18/2021 05:32:00 PM

On daily deaths: Just over a month ago, the 7-day average for daily COVID deaths was around 180.  Since then, the 7-day average of daily deaths has tripled, and since deaths lag hospitalizations, it seems likely daily deaths will double again.   Be careful!

The 7-day average cases is the highest since February 2nd.

The 7-day average hospitalizations is the highest since February 10th.

The 7-day average deaths is the highest since May 13th.

This data is from the CDC.

According to the CDC, on Vaccinations.

Total doses administered: 358,599,835, as of a week ago 353,205,544. Average doses last week: 0.77 million per day.

COVID Metrics
	Today	Yesterday	Week Ago	Goal
Percent fully Vaccinated	51.0%	50.9%	50.3%	≥70.0%1
Fully Vaccinated (millions)	169.2	168.9	167.1	≥2321
New Cases per Day3🚩	130,121	128,508	114,963	≤5,0002
Hospitalized3🚩	74,602	73,099	59,800	≤3,0002
Deaths per Day3🚩	554	534	520	≤502
1 Minimum to achieve "herd immunity" (estimated between 70% and 85%). 2my goals to stop daily posts, 37 day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7 day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

IMPORTANT: For "herd immunity" most experts believe we need 70% to 85% of the total population fully vaccinated (or already had COVID).  

KUDOS to the residents of the 6 states that have achieved 60% of total population fully vaccinated: Vermont at 67.1%, Massachusetts, Maine, Connecticut, Rhode Island and Maryland.

The following 18 states and D.C. have between 50% and 59.9% fully vaccinated: New Jersey at 59.9%, New Hampshire, Washington, New York State, New Mexico, Oregon, District of Columbia, Virginia, Colorado, Minnesota, California, Hawaii, Delaware, Pennsylvania, Wisconsin, Florida, Nebraska, Iowa  and Illinois at 50.0%.

Next up (total population, fully vaccinated according to CDC) are Michigan at 49.7%, South Dakota at 48.1, Ohio at 47.5%, Kentucky at 47.0%, Kansas at 46.7%, Arizona at 46.6%, Alaska at 46.4%, Utah at 46.2%, and Nevada at 46.1%.

Click on graph for larger image.

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

This data is from the CDC.

by Calculated Risk on 8/18/2021 03:33:00 PM

From housing economist Tom Lawler (see important comments on inventory):

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 5.86 million in July, unchanged from June’s preliminary pace and down 0.7% from last July’s seasonally adjusted pace. Unadjusted sales should show a larger YOY decline, reflecting this July’s lower business day count compared to last July.

Local realtor reports, as well as reports from national inventory trackers, suggest that while the inventory of existing homes for sale remained low last month, inventories on the month increased by substantially more than the seasonal norm, and the YOY decline in July was significantly less than in June. What this means for the NAR’s inventory estimate for July, however, is unclear As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for most of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months. Having said that, however, it is clear that seasonally adjusted inventories have been trending higher over the past several months.

Finally, local realtor/MLS reports suggest the median existing single-family home sales price last month was up by about 16.1% from last July.

CR Note: The National Association of Realtors (NAR) is scheduled to release July existing home sales on Monday, August 23, 2021 at 10:00 AM ET. The consensus is for 5.84 million SAAR.

by Calculated Risk on 8/18/2021 12:45:00 PM

From the Fed: Minutes of the Federal Open Market Committee, July 27-28, 2021. Excerpt on asset purchases:

Participants discussed aspects of the Federal Reserve's asset purchases, including progress made toward the Committee's maximum-employment and price-stability goals since the adoption of the asset purchase guidance in December 2020. They also considered the question of how asset purchases might be adjusted once economic conditions met the standards of that guidance. Participants agreed that their discussion at this meeting would be helpful background for the Committee's future decisions about modifying asset purchases. No decisions regarding future adjustments to asset purchases were made at this meeting.
...
In their discussion of considerations related to asset purchases, various participants noted that these purchases were an important part of the monetary policy toolkit and a critical aspect of the Federal Reserve's response to the economic effects of the pandemic, supporting smooth financial market functioning and accommodative financial conditions, which aided the flow of credit to households and businesses and supported the recovery. Participants discussed a broad range of labor market and inflation indicators. All participants assessed that the economy had made progress toward the Committee's maximum-employment and price-stability goals since the adoption of the guidance on asset purchases in December. Most participants judged that the Committee's standard of "substantial further progress" toward the maximum-employment goal had not yet been met. At the same time, most participants remarked that this standard had been achieved with respect to the price-stability goal. A few participants noted, however, that the transitory nature of this year's rise in inflation, as well as the recent declines in longer-term yields and in market-based measures of inflation compensation, cast doubt on the degree of progress that had been made toward the price-stability goal since December. Looking ahead, most participants noted that, provided that the economy were to evolve broadly as they anticipated, they judged that it could be appropriate to start reducing the pace of asset purchases this year because they saw the Committee's "substantial further progress" criterion as satisfied with respect to the price-stability goal and as close to being satisfied with respect to the maximum-employment goal. Various participants commented that economic and financial conditions would likely warrant a reduction in coming months. Several others indicated, however, that a reduction in the pace of asset purchases was more likely to become appropriate early next year because they saw prevailing conditions in the labor market as not being close to meeting the Committee's "substantial further progress" standard or because of uncertainty about the degree of progress toward the price-stability goal. Participants agreed that the Committee would provide advance notice before making changes to its balance sheet policy.

Participants expressed a range of views on the appropriate pace of tapering asset purchases once economic conditions satisfied the criterion laid out in the Committee's guidance. Many participants saw potential benefits in a pace of tapering that would end net asset purchases before the conditions currently specified in the Committee's forward guidance on the federal funds rate were likely to be met. At the same time, participants indicated that the standards for raising the target range for the federal funds rate were distinct from those associated with tapering asset purchases and remarked that the timing of those actions would depend on the course of the economy. Several participants noted that an earlier start to tapering could be accompanied by more gradual reductions in the purchase pace and that such a combination could mitigate the risk of an excessive tightening in financial conditions in response to a tapering announcement.

Participants exchanged views on what the composition of asset purchases should be during the tapering process. Most participants remarked that they saw benefits in reducing the pace of net purchases of Treasury securities and agency MBS proportionally in order to end both sets of purchases at the same time. These participants observed that such an approach would be consistent with the Committee's understanding that purchases of Treasury securities and agency MBS had similar effects on broader financial conditions and played similar roles in the transmission of monetary policy, or that these purchases were not intended as credit allocation. Some of these participants remarked, however, that they welcomed further discussion of the appropriate composition of asset purchases during the tapering process. Several participants commented on the benefits that they saw in reducing agency MBS purchases more quickly than Treasury securities purchases, noting that the housing sector was exceptionally strong and did not need either actual or perceived support from the Federal Reserve in the form of agency MBS purchases or that such purchases could be interpreted as a type of credit allocation.

Participants commented on other factors that were relevant for their consideration of future adjustments to the pace of asset purchases. Many participants noted that, when a reduction in the pace of asset purchases became appropriate, it would be important that the Committee clearly reaffirm the absence of any mechanical link between the timing of tapering and that of an eventual increase in the target range for the federal funds rate. A few participants suggested that the Committee would need to be mindful of the risk that a tapering announcement that was perceived to be premature could bring into question the Committee's commitment to its new monetary policy framework. With respect to the effects of the pandemic, several participants indicated that they would adjust their views on the appropriate path of asset purchases if the economic effects of new strains of the virus turned out to be notably worse than currently anticipated and significantly hindered progress toward the Committee's goals.
emphasis added

by Calculated Risk on 8/18/2021 12:44:00 PM

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

From the AIA: Demand for design activity continues to expand

The Architecture Billings Index (ABI) recorded its sixth consecutive positive month, according to a new report today from The American Institute of Architects (AIA).

The ABI score for July was 54.6. While this was down slightly from June’s score of 57.1, it still indicates very strong business conditions overall (any score above 50 indicates an increase in billings from the prior month). Scoring for new project inquiries also declined in July but remained near its all-time high at 65.0. The score for new design contracts was essentially unchanged from June to July with a score of 58.0.

“In prior business cycles, architecture firms generally saw their project work soften quickly and then recover slowly,” said AIA Chief Economist, Kermit Baker, Hon. AIA, PhD. “So the strength of this recovery is unprecedented. Firm leaders who have leaned into this economic upturn by reinvesting in their firms by hiring staff and upgrading their technology, will likely have a better year than those that anticipated a slower recovery.”
...
• Regional averages: Midwest (58.3); West (56.0); South (54.6); Northeast (54.1)

• Sector index breakdown: commercial/industrial (58.4); institutional (55.4); multi-family residential (54.7); mixed practice (54.4)
emphasis added

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 54.6 in July, down from 57.1 in June. Anything above 50 indicates expansion 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.

This index had been below 50 for eleven consecutive months, but has been solidly positive for the last six months.  

The eleven months of decline represented a significant decrease in design services, and suggests a decline in CRE investment through most of 2021 (This usually leads CRE investment by 9 to 12 months), however we might see a pickup in CRE investment towards the end of the 2021 and into 2022.

by Calculated Risk on 8/18/2021 10:36:00 AM

The BLS released the preliminary annual benchmark revision showing 166,000 fewer payroll jobs as of March 2021. The final revision will be published when the January 2022 employment report is released in February 2022. Usually the preliminary estimate is pretty close to the final benchmark estimate.

The annual revision is benchmarked to state tax records. From the BLS:

In accordance with usual practice, the Bureau of Labor Statistics (BLS) is announcing the preliminary estimate of the upcoming annual benchmark revision to the establishment survey employment series. The final benchmark revision will be issued in February 2022 with the publication of the January 2022 Employment Situation news release.

Each year, the Current Employment Statistics (CES) survey employment estimates are benchmarked to comprehensive counts of employment for the month of March. These counts are derived from state unemployment insurance (UI) tax records that nearly all employers are required to file. For National CES employment series, the annual benchmark revisions over the last 10 years have averaged plus or minus one-tenth of one percent of total nonfarm employment. The preliminary estimate of the benchmark revision indicates a downward adjustment to March 2021 total nonfarm employment of -166,000 (-0.1 percent).
emphasis added

Using the preliminary benchmark estimate, this means that payroll employment in March 2021 was 166,000 lower than originally estimated. In February 2022, the payroll numbers will be revised down to reflect the final estimate. The number is then "wedged back" to the previous revision (March 2020).

Construction was revised down by 44,000 jobs, and manufacturing revised down by 39,000 jobs.

This preliminary estimate showed 421,000 fewer private sector jobs, and 255,000 more government jobs (as of March 2021).

by Calculated Risk on 8/18/2021 10:29:00 AM

Earlier: Housing Starts decreased to 1.534 Million Annual Rate in July

Total housing starts in July were above expectations, however starts in May and June were revised up slightly

Single family starts increased in July, and were up 12% year-over-year. Starts declined at the beginning of the pandemic, and then increased due to strong demand.

The volatile multi-family sector is down 16% year-over-year.

The housing starts report showed total starts were down 7.0% in July compared to the previous month, and total starts were up 2.5% year-over-year compared to July 2020.

The first graph shows the month to month comparison for total starts between 2020 (blue) and 2021 (red). 

Click on graph for larger image.

Starts were up 2.5% in July compared to July 2020.  The year-over-year comparison are more difficult starting in the second half of 2021.

In 2020, starts were off to a strong start before the pandemic, and with low interest rates, and little competing existing home inventory, starts finished 2020 strong.  

Starts were solid in the first half of 2021.

The second graph shows starts under construction, Not Seasonally Adjusted (NSA).

Red is single family units. Currently there are 711 thousand single family units under construction (NSA). This is the highest level since 2006.

Blue is for 2+ units. Currently there are 686 thousand multi-family units under construction.  Last month, at 691 thousand units, was the most since 1974.

Combined, there are 1.397 million units under construction. This is the most since July 2006.