by Calculated Risk on 12/10/2021 01:33:00 PM

Today, in the Real Estate Newsletter: 2nd Look at Local Housing Markets in November

Excerpt:

Adding Houston, Jacksonville, Nashville, New Hampshire, North Texas, Portland and Santa Clara
...
Here is a summary of active listings for these housing markets in November. Inventory was down 15.8% in November month-over-month (MoM) from October, and down 25.0% year-over-year (YoY).

Inventory almost always declines seasonally in November, so the MoM decline is not a surprise. Last month, these markets were down 23.3% YoY, so the YoY decline in November is larger than in October. This isn’t indicating a slowing market.

Notes for all tables:

1. New additions to table in BOLD.

2. Northwest (Seattle), North Texas (Dallas), and Santa Clara (San Jose), Jacksonville, Source: Northeast Florida Association of REALTORS®

by Calculated Risk on 12/10/2021 12:36:00 PM

From BofA:

4Q GDP tracking moved up to 6.5% qoq saar from 6.0%, reflecting the strong signal from the BAC card spending data. [December 10 estimate]
emphasis added

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2021 is 8.7 percent on December 9, up from 8.6 percent on December 7. [December 9 estimate]

by Calculated Risk on 12/10/2021 11:34:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.5% in November. The 16% trimmed-mean Consumer Price Index increased 0.5% in November. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Note: The Cleveland Fed released the median CPI details here: "Fuel oil and other fuels" were up 104% annualized.

Note that Owners' Equivalent Rent and Rent of Primary Residence account for almost 1/3 of median CPI, and these measures were up around 5% to 6% annualized in November.

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. 

On a year-over-year basis, the median CPI rose 3.5%, the trimmed-mean CPI rose 4.6%, and the CPI less food and energy rose 4.9%. Core PCE is for October and increased 4.1% year-over-year.

by Calculated Risk on 12/10/2021 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.8 percent in November on a seasonally adjusted basis after rising 0.9 percent in October, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 6.8 percent before seasonal adjustment.

The monthly all items seasonally adjusted increase was the result of broad increases in most component indexes, similar to last month. The indexes for gasoline, shelter, food, used cars and trucks, and new vehicles were among the larger contributors. The energy index rose 3.5 percent in November as the gasoline index increased 6.1 percent and the other major energy component indexes also rose. The food index increased 0.7 percent as the index for food at home rose 0.8 percent.

The index for all items less food and energy rose 0.5 percent in November following a 0.6-percent increase in October. Along with shelter, used cars and trucks, and new vehicles, the indexes for household furnishings and operations, apparel, and airline fares were among those that increased. The indexes for motor vehicle insurance, recreation, and communication all declined in November.

The all items index rose 6.8 percent for the 12 months ending October, the largest 12-month increase since the period ending June 1982. The index for all items less food and energy rose 4.9 percent over the last 12 months, while the energy index rose 33.3 percent over the last year, and the food index increased 6.1 percent. These changes are the largest 12-month increases in at least 13 years in the respective series.
emphasis added

Both CPI and core CPI were close to expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 12/09/2021 08:47:00 PM

Friday:
• At 8:30 AM ET, The Consumer Price Index for November from the BLS. The consensus is for a 0.7% increase in CPI, and a 0.5% increase in core CPI.

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

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	60.5%	---	≥70.0%1
Fully Vaccinated (millions)	200.7	---	≥2321
New Cases per Day3🚩	118,515	86,315	≤5,0002
Hospitalized3🚩	53,714	48,089	≤3,0002
Deaths per Day3🚩	1,092	854	≤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.

Click on graph for larger image.

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

by Calculated Risk on 12/09/2021 02:46:00 PM

Today, in the Real Estate Newsletter: The Home ATM in Q3 2021

Excerpt:

In Q3 2021, mortgage debt increased $230 billion, the largest quarterly increase since 2006.
...
For Q3 2021, the Net Equity Extraction was $147 billion, or 3.24% of Disposable Personal Income (DPI).   The last two quarters have shown a sharp increase in equity extraction compared to recent years, but the level is nothing like the amount of equity extraction during the housing bubble as a percent of DPI. During the housing bubble we saw several quarters with MEW above 8% of DPI.
...
The bottom line is the recent increase in MEW is not concerning - it is far less as a percent of disposable personal income than during the bubble, and most homeowners have substantial equity.

by Calculated Risk on 12/09/2021 01:13:00 PM

Note: Since occupancy declined sharply at the onset of the pandemic, CoStar is comparing to 2019.

From CoStar: STR: US Weekly Hotel Occupancy Hovers Around Mid-50%

U.S. hotel occupancy increased from the previous week, but performance comparisons with 2019 were lower, according to STR‘s latest data through December 4.

November 28 through December 4, 2021 (percentage change from comparable week in 2019*):

• Occupancy: 54.8% (-8.8%)
• Average daily rate (ADR): $127.92 (-0.5%)
• Revenue per available room (RevPAR): $70.08 (-9.2%)

*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).

Although down compared to 2019, the 4-week average of the occupancy rate is close to the median rate for the previous 20 years (Blue).

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

The occupancy rate will now decline seasonally into the new year.

by Calculated Risk on 12/09/2021 12:55:00 PM

The Federal Reserve released the Q3 2021 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $144.7 trillion during the third quarter of 2021. The value of directly and indirectly held corporate equities decreased $0.3 trillion and the value of real estate increased $1.4 trillion.
...
Household debt increased 6.2 percent at an annual rate in the third quarter of 2021. Consumer credit grew at an annual rate of 5.3 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 7.8 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  

With the sharp decline in GDP in Q2 2020, net worth as a percent of GDP increased sharply.  This reversed somewhat in Q3 as GDP bounced back (even as net worth increased).   But now net worth as a percent of GDP is just below the all-time high set in Q2.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

This graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q3 2021, household percent equity (of household real estate) was at 68.8% - up from 68.3% in Q2. This is the highest percent equity since the 1980s.

Note: about 30.3% of owner occupied households had no mortgage debt as of April 2010. So, the approximately 50+ million households with mortgages have less than 67.7% equity - and about 470 thousand homeowners still have negative equity.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  Note this graph was impacted by the sharp decline in Q2 2020 GDP.

Mortgage debt increased by $230 billion in Q3.  This is the largest quarterly increase in mortgage debt since 2006.

Mortgage debt is up $800 billion from the peak during the housing bubble, but, as a percent of GDP is at 49.6% - up slightly from Q2 - and down from a peak of 73.3% of GDP during the housing bubble.

The value of real estate, as a percent of GDP, increased in Q3, and is well above the average of the last 30 years.

by Calculated Risk on 12/09/2021 09:55:00 AM

From CoreLogic: Homeowners Gained Over $3.2 Trillion in Equity in Q3 2021, CoreLogic Reports

CoreLogic® ... today released the Homeowner Equity Report for the third quarter of 2021. The report shows U.S. homeowners with mortgages (which account for roughly 63% of all properties) have seen their equity increase by 31.1% year over year, representing a collective equity gain of over $3.2 trillion, and an average gain of $56,700 per borrower, since the third quarter of 2020.

This summer, home price growth reached the highest level in more than 45 years, pushing equity gains to another record high and allowing 70,000 properties to regain equity in the third quarter of 2021. These equity gains provided a crucial barrier against foreclosure for the 1.2 million borrowers who reached the end of forbearance in September.
...
“Home price growth is the principal driver of home equity creation,” said Dr. Frank Nothaft, chief economist for CoreLogic. “The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.” ...
Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the third quarter of 2021, negative equity share, and the quarter-over-quarter and year-over-year changes, were as follows:

• Quarterly change: From the second quarter of 2021 to the third quarter of 2021, the total number of mortgaged homes in negative equity decreased by 5.7% to 1.2 million homes, or 2.1% of all mortgaged properties.

• Annual change: In the third quarter of 2020, 1.6 million homes, or 3% of all mortgaged properties, were in negative equity. This number decreased by 28.9%, or approximately 470,000 properties, in the third quarter of 2021.

• National aggregate value: The national aggregate value of negative equity was approximately $276.2 billion at the end of the third quarter of 2021. This is up quarter over quarter by approximately $8.2 billion, or 3%, from $268 billion in the second quarter of 2021, and down year over year by approximately $8.3 billion, or 2.9%, from $284.5 billion in the third quarter of 2020.
emphasis added

Click on graph for larger image.

This graph from CoreLogic compares Q3 to Q2 2021 equity distribution by LTV. There are still a few properties with LTV over 125%.  But most homeowners have a significant amount of equity.  This is a very different picture than at the start of the housing bust when many homeowners had little equity.

On a year-over-year basis, the number of homeowners with negative equity has declined from 1.6 million to 470 thousand.

by Calculated Risk on 12/09/2021 08:34:00 AM

The DOL reported:

In the week ending December 4, the advance figure for seasonally adjusted initial claims was 184,000, a decrease of 43,000 from the previous week's revised level. This is the lowest level for initial claims since September 6, 1969 when it was 182,000. The previous week's level was revised up by 5,000 from 222,000 to 227,000. The 4-week moving average was 218,750, a decrease of 21,250 from the previous week's revised average. This is the lowest level for this average since March 7, 2020 when it was 215,250. The previous week's average was revised up by 1,250 from 238,750 to 240,000.
emphasis added

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 218,750.

The previous week was revised up.

Regular state continued claims increased to 1,992,000 (SA) from 1,954,000 (SA) the previous week.

Weekly claims were well below the consensus forecast.