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Thursday, January 06, 2022

ISM® Services Index Decreased to 62.0% in December

by Calculated Risk on 1/06/2022 10:03:00 AM

(Posted with permission). The December ISM® Services index was at 62.0%, down from 69.1% last month. The employment index decreased to 54.9%, from 56.5%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 62% December 2021 Services ISM® Report On Business®

Economic activity in the services sector grew in December for the 19th month in a row — with the Services PMI® exceeding 60 percent for the 10th consecutive month — say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In December, the Services PMI® registered 62 percent, 7.1 percentage points below November’s all-time high reading of 69.1 percent. The Business Activity Index registered 67.6 percent, a decrease of 7 percentage points compared to the reading of 74.6 percent in November, and the New Orders Index registered 61.5 percent, 8.2 percentage points lower than the all-time high reading of 69.7 percent reported in November.
emphasis added
This was below the consensus forecast, and the employment index decreased to 54.9%, from 56.5% the previous month.

Trade Deficit Increased to $80.2 Billion in November

by Calculated Risk on 1/06/2022 08:44:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $80.2 billion in November, up $13.0 billion from $67.2 billion in October, revised.

November exports were $224.2 billion, $0.4 billion more than October exports. November imports were $304.4 billion, $13.4 billion more than October imports.
emphasis added
U.S. Trade Exports Imports Click on graph for larger image.

Both exports and imports increased in November.

Exports are up 21% compared to November 2020; imports are up 21% compared to November 2020.

Both imports and exports decreased sharply due to COVID-19, and have now bounced back (imports more than exports),

The second graph shows the U.S. trade deficit, with and without petroleum.

U.S. Trade Deficit 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.

Note that net, imports and exports of petroleum products are close to zero.

The trade deficit with China increased to $32.3 billion in November, from $30.6 billion in November 2020.

Weekly Initial Unemployment Claims Increase to 207,000

by Calculated Risk on 1/06/2022 08:34:00 AM

The DOL reported:

In the week ending January 1, the advance figure for seasonally adjusted initial claims was 207,000, an increase of 7,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 198,000 to 200,000. The 4-week moving average was 204,500, an increase of 4,750 from the previous week's revised average. The previous week's average was revised up by 500 from 199,250 to 199,750.
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 increased to 204,500.

The previous week was revised up.

Weekly claims were close to the consensus forecast.

Wednesday, January 05, 2022

Thursday: Unemployment Claims, Trade Deficit, ISM Services

by Calculated Risk on 1/05/2022 09:00:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  Initial claims were 198 thousand last week.

• At 8:30 AM, Trade Balance report for November from the Census Bureau. The consensus is the trade deficit to be $70.0 billion.  The U.S. trade deficit was at $67.1 billion in October.

• At 10:00 AM, the ISM Services Index for December.

And on COVID (focus on hospitalizations and deaths):

COVID Metrics
 TodayWeek
Ago
Goal
Percent fully Vaccinated62.3%---≥70.0%1
Fully Vaccinated (millions)206.8---≥2321
New Cases per Day3🚩554,328281,842≤5,0002
Hospitalized3🚩85,42364,152≤3,0002
Deaths per Day3🚩1,2381,072≤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.

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

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

New cases are at record levels.  It appears likely hospitalizations will exceed the previous 7-day average record of 124,031 a year ago.

Fortunately, deaths are still well below the previous 7-day average record of 3,421 in January 2021.


Apartment Vacancy Rate Declined in Q4

by Calculated Risk on 1/05/2022 02:42:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Apartment Vacancy Rate Declined in Q4

A brief excerpt:

Reis reported that the apartment vacancy rate was at 4.7% in Q4 2021, down from 4.8% in Q3, and down from a pandemic peak of 5.4% in Q1 2021.

Case-Shiller House Prices IndicesThis graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999).  Note: Reis is just for large cities.

Reis also reported the asking rents were up 2.8% in Q4 compared to Q3, and up 11.9% year-over-year. Rents were down year-over-year through Q2 2021 (due to the pandemic) and picked up sharply in Q3. Even with the recent surge in rents, rents are only up 4.5% annualized over the last 2 years (since rents decreased early in the pandemic).
There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

Reis: Office Vacancy Rates Decreased Slightly in Q4

by Calculated Risk on 1/05/2022 01:46:00 PM

Reis reported the office vacancy rate was at 18.1% in Q4 2021, down from 18.2% in Q3, and up from 17.8% in Q4 2020. 

Q2 2021 saw the highest vacancy rate for offices since the early '90s at 18.5% (following the S&L crisis).

Office Vacancy RateClick on graph for larger image.

The first graph shows the office vacancy rate starting in 1980 (prior to 1999 the data is annual).

The office vacancy rate was elevated prior to the pandemic and moved up during the pandemic.

Reis also reported that office effective rents were unchanged in Q4; rents are about the same rate as early 2019.

All vacancy data courtesy of Reis

Annual Vehicle Sales increase 3% in 2021; Sales Mix and Heavy Trucks

by Calculated Risk on 1/05/2022 11:23:00 AM

The BEA released their estimate of light vehicle sales for December today. The BEA estimates sales of 12.44 million SAAR in December 2021 (Seasonally Adjusted Annual Rate), down 3.3% from the November sales rate, and down 23.8% from December 2020. 


Annual Vehicle SalesClick on graph for larger image.

The first graph shows annual sales since 1976.

Light vehicle sales in 2021 were at 14.93 million, up 3.1% from 14.47 million in 2020.

Sales in 2021 were impacted significantly by supply chain disruptions, and sales were still down 12% from the 2019 level.

This suggests vehicle sales will increase in 2022 and boost GDP.

Vehicle Sales This graph shows monthly light vehicle sales since 1967 from the BEA. The dashed line is sales for the current month.

The impact of COVID-19 was significant, and April 2020 was the worst month.  After April 2020, sales increased, and were close to sales in 2019 (the year before the pandemic).  

However, sales decreased earlier this year due to supply issues. It appears the "supply chain bottom" was in September, but sales in December were disappointing again.

This third graph shows sales for passenger cars and trucks / SUVs through December 2021.

Vehicle SalesOver time the mix has changed more and more towards light trucks and SUVs (red).

The percent of light trucks and SUVs was at 79% in December 2021 - near the all-time high.

The fourth graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the December 2021 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new all-time high of 563 thousand SAAR in September 2019.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy Truck SalesHeavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 364 thousand SAAR in December, down from 439 thousand SAAR in November, and down 19.5% from 452 thousand SAAR in December 2020.  The decline is probably due to supply disruptions.

ADP: Private Employment increased 807,000 in December

by Calculated Risk on 1/05/2022 08:20:00 AM

From ADP:

Private sector employment increased by 807,000 jobs from November to December according to the December ADP® National Employment ReportTM. Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute® in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual data of those who are on a company’s payroll, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis

“December’s job market strengthened as the fallout from the Delta variant faded and Omicron’s impact had yet to be seen,” said Nela Richardson, chief economist, ADP. “Job gains were broad-based, as goods producers added the strongest reading of the year, while service providers dominated growth. December’s job growth brought the fourth quarter average to 625,000, surpassing the 514,000 average for the year. While job gains eclipsed 6 million in 2021, private sector payrolls are still nearly 4 million jobs short of pre-COVID-19 levels.
emphasis added
This was well above the consensus forecast of 413,000 for this report.

The BLS report will be released Friday, and the consensus is for 400 thousand non-farm payroll jobs added in December. The ADP report has not been very useful in predicting the BLS report.

MBA: Mortgage Applications Decrease over Two-Week Period

by Calculated Risk on 1/05/2022 07:00:00 AM

From the MBA: Mortgage Applications Decreased Over a Two-Week Period in Latest MBA Weekly Survey

Mortgage applications decreased 2.7 percent from two weeks earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 31, 2021. The results include adjustments to account for the holidays.

... The holiday adjusted Refinance Index decreased 2 percent from the two weeks ago and was 40 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 4 percent from two weeks earlier. The unadjusted Purchase Index decreased 32 percent compared with the two weeks ago and was 12 percent lower than the same week one year ago.

“Mortgage rates continued to creep higher over the past two weeks, as markets maintained an optimistic view of the economy. The 30-year fixed rate increased 6 basis points to 3.33 percent – the highest since April 2021. The higher rates to close 2021 caused refinance activity to decrease 2.2 percent. Refinance demand continues to dwindle, as many borrowers refinanced in 2020, and in early 2021 – when mortgage rates were around 40 basis points lower,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The purchase market also finished the year on a slower note, with the final week coming in at the weakest since October 2021. Even though average loan sizes were lower, home price appreciation remains at very high levels.”

Added Kan, “Despite supply and affordability challenges, 2021 was a record year for purchase originations. MBA expects 2022 to be even stronger, with total purchase activity reaching $1.74 trillion.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.33 percent from 3.31 percent, with points increasing to 0.48 from 0.38 (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.

With relatively low rates, the index remains slightly elevated, but down sharply from last year.

The second graph shows the MBA mortgage purchase index

Mortgage Purchase Index According to the MBA, purchase activity is down 12% year-over-year unadjusted.

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

Tuesday, January 04, 2022

December Vehicles Sales decreased to 12.44 million SAAR

by Calculated Risk on 1/04/2022 09:42:00 PM

Wards Auto released their estimate of light vehicle sales for December. Wards Auto estimates sales of 12.44 million SAAR in December 2021 (Seasonally Adjusted Annual Rate), down 3.2% from the November sales rate, and down 23.7% from December 2020. 


Vehicle SalesClick on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards Auto's estimate for December (red).

The impact of COVID-19 was significant, and April 2020 was the worst month.

After April 2020, sales increased, and were close to sales in 2019 (the year before the pandemic).  

However, sales decreased earlier this year due to supply issues. It appears the "supply chain bottom" was in September, but sales in December were disappointing again.