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Thursday, January 16, 2025

Housing Discussion with Altos Research's Mike Simonsen

by Calculated Risk on 1/16/2025 02:39:00 PM

Here is a YouTube video of a discussion with Mike Simonsen. Enjoy.

NAHB: Builder Confidence "Edges Up" in January

by Calculated Risk on 1/16/2025 10:19:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 47, up from 46 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Edges Up Even as Market Risk Concerns Rise

Builder sentiment edged higher to begin the year on hopes for an improved economic growth and regulatory environment. At the same time, builders expressed concerns over how building material tariffs and costs and a larger government deficit would put upward pressure on inflation and mortgage rates.

Builder confidence in the market for newly built single-family homes was 47 in January, up one point from December, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“Builders are facing continued challenges for housing demand in the near-term, with mortgage rates up from near 6.1% in late September to above 6.9% today,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “Land is expensive and financing for private builders remains costly. However, there is hope that policymakers are taking the impact of regulatory hurdles seriously and will make improvements in 2025.”

“NAHB is forecasting a slight gain for single-family housing starts in 2025, as the market faces offsetting upside and downside risks from an improving regulatory outlook and ongoing elevated interest rates,” said NAHB Chief Economist Robert Dietz. “And while ongoing, but slower easing from the Federal Reserve should help financing for private builders currently squeezed out of some local markets, builders report cancellations are climbing as a direct result of mortgage rates rising back up near 7%.”

The latest HMI survey also revealed that 30% of builders cut home prices in January. This share has been stable between 30% and 33% since last July. Meanwhile, the average price reduction was 5% in January, the same rate as in December. The use of sales incentives was 61% in January. This share has remained between 60% and 64% since last June.
...
The HMI index gauging current sales conditions rose three points to 51 and the gauge charting traffic of prospective buyers posted a two-point gain to 33. The component measuring sales expectations in the next six months fell six points to 60 in part due to the elevated interest rate environment. While this serves as a cautionary note, the future sales component is still the highest of the three sub-indices and well above the breakeven level of 50.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased five points to 60, the Midwest moved one point higher to 47, the South posted a one-point gain to 46 and the West fell one point to 40.
emphasis added
NAHB HMI Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was above the consensus forecast.

Retail Sales Increased 0.4% in December

by Calculated Risk on 1/16/2025 10:12:00 AM

On a monthly basis, retail sales increased 0.4% from November to December (seasonally adjusted), and sales were up 3.9 percent from December 2023.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for December 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $729.2 billion, an increase of 0.4 percent from the previous month, and up 3.9 percent from December 2023. ... The October 2024 to November 2024 percent change was revised from up 0.7 percent to up 0.8 percent.
emphasis added
Retail Sales Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline was up 0.4% in December.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales, ex-gasoline, increased by 4.1% on a YoY basis.

Year-over-year change in Retail Sales The change in sales in December were slightly below expectations, however sales in October and November were revised up.

Weekly Initial Unemployment Claims Increase to 217,000

by Calculated Risk on 1/16/2025 10:02:00 AM

The DOL reported:

In the week ending January 11, the advance figure for seasonally adjusted initial claims was 217,000, an increase of 14,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 201,000 to 203,000. The 4-week moving average was 212,750, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 500 from 213,000 to 213,500.
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 213,000.

The previous week was revised up.

Weekly claims were close to the consensus forecast.

Wednesday, January 15, 2025

Thursday: Retail Sales, Unemployment Claims, Philly Fed Mfg, Homebuider Survey

by Calculated Risk on 1/15/2025 08:13:00 PM

Mortgage Rates Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for a increase to 215 thousand from 201 thousand last week.

• At 8:30 AM, Retail sales for December is scheduled to be released.  The consensus is for a 0.5% increase in retail sales.

• At 8:30 AM, the Philly Fed manufacturing survey for January. 

• At 10:00 AM, The January NAHB homebuilder survey.  The consensus is for a reading of 45, down from 46 the previous month. Any number below 50 indicates that more builders view sales conditions as poor than good.

Fed's Beige Book: "Economic activity increased slightly to moderately"

by Calculated Risk on 1/15/2025 02:38:00 PM

Fed's Beige Book

Economic activity increased slightly to moderately across the twelve Federal Reserve Districts in late November and December. Consumer spending moved up moderately, with most Districts reporting strong holiday sales that exceeded expectations. Vehicle sales grew modestly. Construction activity decreased overall, with several Districts indicating that high costs for materials and financing were weighing on growth. Manufacturing decreased slightly on net, and a number of Districts said manufacturers were stockpiling inventories in anticipation of higher tariffs. Residential real estate activity was unchanged on balance, as high mortgage rates continued to hold back demand. Commercial real estate sales edged up. The nonfinancial services sector grew slightly overall, with Districts highlighting growth in leisure and hospitality and transportation, notably air travel. Truck freight volumes, however, were down. Financial service providers reported modest growth in lending and little change in asset quality overall, though lenders and community organizations voiced concerns about delinquencies among small businesses and lower-income households. Nonprofit social service agencies faced high demand amidst uncertainty about future funding levels. Agricultural conditions remained weak overall, with generally lower farm incomes and weather-related struggles in some areas. The spread of avian flu reduced egg supplies and pushed up prices. Energy activity was mixed. More contacts were optimistic about the outlook for 2025 than were pessimistic about it, though contacts in several Districts expressed concerns that changes in immigration and tariff policy could negatively affect the economy.

Labor Markets

Employment ticked up on balance, with six Districts reporting a slight increase and six reporting no change. Contacts in several service industries, notably healthcare, continued to see job growth. Construction employment increased slightly, while manufacturing employment was flat. Contacts across multiple sectors noted difficulty finding skilled workers, and reports of layoffs remained rare. However, contacts in some Districts expressed greater uncertainty about their future staffing needs. Wage growth picked up to a moderate pace in most Districts, though there were some reports that wage pressures had eased.

Prices

Prices increased modestly overall, with growth rates ranging from flat to moderate. Contacts in most Districts reported modest increases in selling prices, though there were instances of flat or decreasing prices as well, particularly in the retail and manufacturing sectors. Input costs also rose, with contacts highlighting higher insurance prices, particularly for health insurance. However, as with selling prices, there were several mentions of flat or lower input costs, particularly for fuel. Contacts expected prices to continue to rise in 2025, with some noting the potential for higher tariffs to contribute to price increases.
emphasis added

Part 2: Current State of the Housing Market; Overview for mid-January 2025

by Calculated Risk on 1/15/2025 12:42:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-January 2025

A brief excerpt:

Yesterday, in Part 1: Current State of the Housing Market; Overview for mid-January 2025 I reviewed home inventory, housing starts and sales.

In Part 2, I will look at house prices, mortgage rates, rents and more.
...
Case-Shiller House Prices IndicesThe Case-Shiller National Index increased 3.6% year-over-year (YoY) in October and will be about the same YoY - or slightly higher - in the November report (based on other data).
...
Other measures of house prices suggest prices will be up about the same - or maybe a little higher - YoY in the November Case-Shiller index as in the October report.
There is much more in the article.

Cleveland Fed: Median CPI increased 0.3% and Trimmed-mean CPI increased 0.3% in December

by Calculated Risk on 1/15/2025 11:11:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI.

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.3% in December. The 16% trimmed-mean Consumer Price Index increased 0.3%. "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".

Inflation Measures 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 3.8% (down from 3.9% YoY in November), the trimmed-mean CPI rose 3.2% (down slightly from 3.2%), and the CPI less food and energy rose 3.2% (down from 3.3%). 

Core PCE is for November was up 2.8% YoY, up slightly from 2.8% in October.

YoY Measures of Inflation: Services, Goods and Shelter

by Calculated Risk on 1/15/2025 08:48:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned when services less rent of shelter was up around 8% year-over-year.  This declined, but is still elevated, and is now up 4.0% YoY.

Services ex-ShelterClick on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through December 2024.


Services were up 4.4% YoY as of December 2024, down from 4.5% YoY in November.

Services less rent of shelter was up 4.0% YoY in December, down from 4.1% YoY in November

Goods CPIThe second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -1.9% YoY as of December 2024, up from -2.0% YoY in November.

Commodities less food and energy commodities were at -0.5% YoY in December, up from -0.7% YoY in November.

ShelterHere is a graph of the year-over-year change in shelter from the CPI report (through December) and housing from the PCE report (through November)

Shelter was up 4.6% year-over-year in December, down from 4.8% in November. Housing (PCE) was up 4.8% YoY in November, down from 5.0% in October.

This is still catching up with private new lease data.  

Core CPI ex-shelter was up 2.1% YoY in December.

BLS: CPI Increased 0.4% in December; Core CPI increased 0.2%

by Calculated Risk on 1/15/2025 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.4 percent on a seasonally adjusted basis in December, after rising 0.3 percent in November, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.9 percent before seasonal adjustment.

The index for energy rose 2.6 percent in December, accounting for over forty percent of the monthly all items increase. The gasoline index increased 4.4 percent over the month. The index for food also increased in December, rising 0.3 percent as both the index for food at home and the index for food away from home increased 0.3 percent each.

The index for all items less food and energy rose 0.2 percent in December, after increasing 0.3 percent in each of the previous 4 months. Indexes that increased in December include shelter, airline fares, used cars and trucks, new vehicles, motor vehicle insurance, and medical care. The indexes for personal care, communication, and alcoholic beverages were among the few major indexes that decreased over the month.

The all items index rose 2.9 percent for the 12 months ending December, after rising 2.7 percent over the 12 months ending November. The all items less food and energy index rose 3.2 percent over the last 12 months. The energy index decreased 0.5 percent for the 12 months ending December. The food index increased 2.5 percent over the last year.
emphasis added
The change in CPI was close to expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.