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Thursday, June 16, 2022

Lawler: Early Read on Existing Home Sales in May

by Calculated Risk on 6/16/2022 03:33:00 PM

From housing economist Tom Lawler:

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 5.35 million in May, down 4.6% from April’s preliminary pace and down 9.6% from last May’s seasonally adjusted pace. Unadjusted sales should show a smaller YOY % decline, reflecting this May’s higher business-day count compared to last May’s.

Local realtor reports, as well as reports from national inventory trackers, suggest that the inventory of existing homes for sale last month was up slightly from a year earlier. However, the NAR’s estimate may not show the same increase as other reports, many of which exclude listings with pending contracts. E.g., the Realtor.com report for May showed that listings excluding those with pending contracts were up 8.0% from last May, while listings including pending contracts were down 3.9% YOY. (Pending listings in the Realtor.com report were down 12.2% from last May.). The NAR’s inventory estimate has tracked the Realtor.com total inventory measure more closely that the “ex-pendings” inventory measure. (Note also that the Realtor.com inventory number reflects average listings during the month, while the NAR inventory number is an end-of-month estimate.)

Finally, local realtor/MLS reports suggest the median existing single-family home sales price last month was up by about 14.7% from last May.

CR Note: The National Association of Realtors (NAR) is scheduled to release May existing home sales on Tuesday, June 21, 2022, at 10:00 AM ET. The consensus is for 5.41 million SAAR.

Hotels: Occupancy Rate Down 4.1% Compared to Same Week in 2019

by Calculated Risk on 6/16/2022 01:42:00 PM

U.S. hotel performance jumped from the previous week, and revenue per available room (RevPAR) reached an all-time weekly high on a nominal basis, according to STR‘s latest data through June 11.

June 5-11, 2022 (percentage change from comparable week in 2019*):

Occupancy: 70.6% (-4.1%)
• Average daily rate (ADR): $155.37 (+15.4%)
• Revenue per available room (RevPAR): $109.76 (+10.7%)

*Due to the pandemic impact, 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.

Hotel Occupancy RateClick on graph for larger image.

The red line is for 2022, black is 2020, blue is the median, and dashed light blue is for 2021.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is above the median rate for the previous 20 years (Blue).

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

The 4-week average of the occupancy rate will increase over the summer.

May Housing Starts: All-Time Record Housing Units Under Construction

by Calculated Risk on 6/16/2022 09:20:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: May Housing Starts: All-Time Record Housing Units Under Construction

Excerpt:

Yesterday, Fed Chair Powell started to mention the record number of housing units under construction, see: Fed Chair Powell: "Homebuyers need a bit of a reset"
“How much will it affect housing prices?  Not really sure.  Obviously, we are watching that quite carefully.  You’d think over time … There is a tremendous amount of supply in the housing market of unfinished homes … and as those come online …”
And then he quickly changed direction. Perhaps he was concerned about spooking homebuyers about the coming increase in new supply.

The fourth graph shows housing starts under construction, Seasonally Adjusted (SA).

Red is single family units. Currently there are 822 thousand single family units under construction (SA). This matches last month as the highest level since November 2006. The reason there are so many homes is probably due to construction delays.

Housing Units Under ConstructionBlue is for 2+ units. Currently there are 843 thousand multi-family units under construction.  This is the highest level since April 1974! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are a record 1.665 million units under construction. This above the previous record of 1.628 million units that were under construction in 1973 (mostly apartments in 1973 for the baby boom generation).
There is much more in the post.  You can subscribe at https://calculatedrisk.substack.com/ (Most content is available for free, so please subscribe).

Housing Starts Decreased to 1.549 million Annual Rate in May

by Calculated Risk on 6/16/2022 08:42:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in May were at a seasonally adjusted annual rate of 1,549,000. This is 14.4 percent below the revised April estimate of 1,810,000 and is 3.5 percent below the May 2021 rate of 1,605,000. Single‐family housing starts in May were at a rate of 1,051,000; this is 9.2 percent below the revised April figure of 1,157,000. The May rate for units in buildings with five units or more was 469,000

Building Permits:
Privately‐owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,695,000. This is 7.0 percent below the revised April rate of 1,823,000, but is 0.2 percent above the May 2021 rate of 1,691,000. Single‐family authorizations in May were at a rate of 1,048,000; this is 5.5 percent below the revised April figure of 1,109,000. Authorizations of units in buildings with five units or more were at a rate of 592,000 in May.
emphasis added
Total Housing Starts and Single Family Housing StartsClick on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (blue, 2+ units) decreased in May compared to April.   Multi-family starts were unchanged year-over-year in May. 

Single-family starts (red) decreased in May and were down 5.3% year-over-year.

Total Housing Starts and Single Family Housing StartsThe second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery (but still not historically high).

Total housing starts in May were well below expectations, however, starts in March and April, were revised up, combined.

I'll have more later …

Weekly Initial Unemployment Claims at 229,000

by Calculated Risk on 6/16/2022 08:33:00 AM

The DOL reported:

In the week ending June 11, the advance figure for seasonally adjusted initial claims was 229,000, a decrease of 3,000 from the previous week's revised level. The previous week's level was revised up by 3,000 from 229,000 to 232,000. The 4-week moving average was 218,500, an increase of 2,750 from the previous week's revised average. The previous week's average was revised up by 750 from 215,000 to 215,750.
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 218,500.

The previous week was revised up.

Weekly claims were higher than the consensus forecast.

Wednesday, June 15, 2022

Thursday: Housing Starts, Unemployment Claims, Philly Fed Mfg

by Calculated Risk on 6/15/2022 09:03:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 215 thousand down from 229 thousand last week.

• Also at 8:30 AM, Housing Starts for May. The consensus is for 1.700 million SAAR, down from 1.724 million SAAR in April.

• Also at 8:30 AM, the Philly Fed manufacturing survey for June. The consensus is for a reading of 5.3, up from 2.6.

On COVID (focus on hospitalizations and deaths):

COVID Metrics
 NowWeek
Ago
Goal
Percent fully Vaccinated66.8%---≥70.0%1
Fully Vaccinated (millions)221.9---≥2321
New Cases per Day3103,935108,458≤5,0002
Hospitalized3🚩23,89823,477≤3,0002
Deaths per Day3276314≤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 deaths reported.

New cases have quadrupled from the recent low.  

Average daily deaths bottomed in July 2021 at 214 per day.

Fed Chair Powell: "Homebuyers need a bit of a reset"

by Calculated Risk on 6/15/2022 04:25:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fed Chair Powell: "Homebuyers need a bit of a reset"

A brief excerpt:

Here are some interesting comments on housing from Fed Chair Jerome Powell today. This is a quick transcript - sorry for any errors - the video is here and the discussion on housing starts around 1:51:00.
...
Powell: ...
"I'd say if you are homebuyer, somebody or a young person looking to buy a home, you need a bit of a reset.   We need to get to back to a place where supply and demand are back together and where inflation is down low again, and mortgage rates are low again.

This will be a process were by ideally, we do our work in a way were the housing market settles in a new place.
There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

FOMC Projections and Press Conference

by Calculated Risk on 6/15/2022 02:12:00 PM

Statement here.

Fed Chair Powell press conference video here or on YouTube here, starting at 2:30 PM ET.

Here are the projections. In March, most participants expected seven rate hikes in 2022.  Now, participants expect thirteen 25bp rate hikes in 2022.

Wall Street forecasts are being revised down for 2022 due to the ongoing negative impacts from the pandemic. the war in Ukraine and financial tightening. The FOMC lowered their 2022 forecast down to similar growth rates.


GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date202220232024
June 20221.5 to 1.91.3 to 2.01.5 to 2.0
Mar 20222.5 to 3.02.1 to 2.51.8 to 2.0
1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.6% in May. The FOMC increased their projections for the unemployment rate for Q4 2022.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date202220232024
June 20223.6 to 3.83.8 to 4.13.9 to 4.1
Mar 20223.4 to 3.63.3 to 3.63.2 to 3.7
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2022, PCE inflation was up 6.3% from April 2021.   The FOMC revised up sharply their inflation projections for 2022.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date202220232024
June 20225.0 to 5.32.4 to 3.02.0 to 2.5
Mar 20224.1 to 4.72.3 to 3.02.1 to 2.4

PCE core inflation was up 4.9% in April year-over-year. And the FOMC revised up their projections.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date202220232024
June 20224.2 to 4.52.5 to 3.22.1 to 2.5
Mar 20223.9 to 4.42.4 to 3.02.1 to 2.4

FOMC Statement: Raise Rates 75 bp

by Calculated Risk on 6/15/2022 02:02:00 PM

Fed Chair Powell press conference video here or on YouTube here, starting at 2:30 PM ET.

FOMC Statement:

Overall economic activity appears to have picked up after edging down in the first quarter. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher energy prices, and broader price pressures.

The invasion of Ukraine by Russia is causing tremendous human and economic hardship. The invasion and related events are creating additional upward pressure on inflation and are weighing on global economic activity. In addition, COVID-related lockdowns in China are likely to exacerbate supply chain disruptions. The Committee is highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 1‑1/2 to 1-3/4 percent and anticipates that ongoing increases in the target range will be appropriate. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michelle W. Bowman; Lael Brainard; James Bullard; Lisa D. Cook; Patrick Harker; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller. Voting against this action was Esther L. George, who preferred at this meeting to raise the target range for the federal funds rate by 0.5 percentage point to 1-1/4 percent to 1-1/2 percent. Patrick Harker voted as an alternate member at this meeting.
emphasis added

NAHB: Builder Confidence Decreased to 67 in June; "Traffic of prospective buyers" Falls below Breakeven

by Calculated Risk on 6/15/2022 10:07:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 67, down from 69 in May. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Weakening Builder Confidence Points to Economic Troubles Ahead

Rising inflation and higher mortgage rates are slowing traffic of prospective home buyers and putting a damper on builder sentiment. In a troubling sign for the housing market, builder confidence in the market for newly built single-family homes posted its sixth straight monthly decline in June, falling two points to 67, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This marks the lowest HMI reading since June 2020.

“Six consecutive monthly declines for the HMI is a clear sign of a slowing housing market in a high inflation, slow growth economic environment,” said NAHB Chairman Jerry Konter, a builder and developer from Savannah, Ga. “The entry-level market has been particularly affected by declines for housing affordability and builders are adopting a more cautious stance as demand softens with higher mortgage rates. Government officials need to enact policies that will support the supply-side of the housing market as costs continue to climb.”

“The housing market faces both demand-side and supply-side challenges,” said NAHB Chief Economist Robert Dietz. “Residential construction material costs are up 19% year-over-year with cost increases for a variety of building inputs, except for lumber, which has experienced recent declines due to a housing slowdown. On the demand-side of the market, the increase for mortgage rates for the first half of 2022 has priced out a significant number of prospective home buyers, as reflected by the decline for the traffic measure of the HMI.”
...
All three HMI indices posted declines in June. The component charting traffic of prospective buyers fell five points to 48, marking the first time this gauge has fallen below the breakeven level of 50 since June 2020. The HMI index gauging current sales conditions fell one point to 77 and the gauge measuring sales expectations in the next six months fell two points to 61.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell one point to 71, the Midwest dropped six points to 56, the South fell two points to 78 and the West posted a nine-point decline to 74.
emphasis added
NAHB HMI Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was slightly below the consensus forecast, but still historically a decent reading. 

This survey was before the recent surge in mortgage rates, and "traffic of prospective buyers" is now below breakeven (below 50).