by Calculated Risk on 10/07/2016 01:01:00 PM

This is a key distressed market to follow since Las Vegas has seen the largest price decline of any of the Case-Shiller composite 20 cities.

The Greater Las Vegas Association of Realtors reported Southern Nevada Housing Supply Shrinks as Sales Rise and Prices Stabilize, GLVAR Housing Statistics for September 2016

The Greater Las Vegas Association of REALTORS® (GLVAR) reported Friday that the local housing supply is shrinking as Southern Nevada home sales increase and prices stabilize.
...
According to GLVAR, the total number of existing local homes, condominiums and townhomes sold in September was 3,541, up from 3,285 total sales in September 2015. Compared to the same month one year ago, 7.6 percent more homes, and 8.9 percent more condos and townhomes sold in September.
...
The total number of single-family homes listed for sale on GLVAR’s Multiple Listing Service in September was 12,794, down 4.4 percent from one year ago. GLVAR tracked a total of 2,241 condos, high-rise condos and townhomes listed for sale on its MLS in September, down 34.8 percent from one year ago.

By the end of September, GLVAR reported 7,427 single-family homes listed without any sort of offer. That’s down 8.7 percent from one year ago. For condos and townhomes, the 1,161 properties listed without offers in September represented a 49.8 percent decrease from one year ago.

GLVAR continues to track fewer distressed sales and more traditional home sales, where lenders are not controlling the transaction. In September, 4.6 percent of all local sales were short sales – when lenders allow borrowers to sell a home for less than what they owe on the mortgage. That’s down from 6.8 percent of all sales one year ago. Another 6.0 percent of all September sales were bank-owned, down from 7.1 percent one year ago.
emphasis added

1) Overall sales were up 7.8% year-over-year.

2) Total active inventory (single-family and condos) is down 18% from a year ago (A very sharp decline in condo inventory).

3) Distressed sales are down from 13.9% of sales in September 2015, to 10.6% of sales in September 2016.

by Calculated Risk on 10/07/2016 09:55:00 AM

The headline jobs number was decent. Private sector job growth was solidly above the consensus forecast (167,000 vs forecast of 144,000), however public employment declined by 11,000. Even though the unemployment rate ticked up to 5.0%, both the participation rate and employment-population ratio also increased. And wage growth is increasing (slowly).

Earlier: September Employment Report: 156,000 Jobs, 5.0% Unemployment Rate

Job growth has averaged 178,000 per month this year.

In September, the year-over-year change was 2.45 million jobs - a solid gain.

Average Hourly Earnings

This graph is based on “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report. Note: There are also two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  Nominal wage growth was at 2.6% YoY in September.  This series is noisy, however overall wage growth is trending up.

Note: CPI has been running around 2%, so there has been real wage growth.

Employment-Population Ratio, 25 to 54 years old

Since the overall participation rate has declined recently due to cyclical (recession) and demographic (aging population, younger people staying in school) reasons, here is the employment-population ratio for the key working age group: 25 to 54 years old.

In the earlier period the participation rate for this group was trending up as women joined the labor force. Since the early '90s, the participation rate moved more sideways, with a downward drift starting around '00 - and with ups and downs related to the business cycle.

The 25 to 54 participation rate increased in September to 81.5%, and the 25 to 54 employment population ratio increased to 78.0%.

The participation rate has been trending down for this group since the late '90s, however, with more younger workers (and fewer older workers), the participation rate might move up some more.

Part Time for Economic Reasons

From the BLS report:

The number of persons employed part time for economic reasons (sometimes referred to as involuntary part-time workers) was little changed in September at 5.9 million. These individuals, who would have preferred full-time employment, were working part time because their hours had been cut back or because they were unable to find a full-time job.

The number of persons working part time for economic reasons decreased in September. This level suggests slack still in the labor market.

These workers are included in the alternate measure of labor underutilization (U-6) that was unchanged at 9.7% in September.

Unemployed over 26 Weeks

This graph shows the number of workers unemployed for 27 weeks or more.

According to the BLS, there are 1.974 million workers who have been unemployed for more than 26 weeks and still want a job. This was down from 2.006 million in August.

This is generally trending down, but is still high.

There are still signs of slack (as example, elevated level of part time workers for economic reasons and U-6), but there also signs the labor market is tightening.

Overall this was another decent report.

by Calculated Risk on 10/07/2016 08:40:00 AM

From the BLS:

Total nonfarm payroll employment increased by 156,000 in September, and the unemployment rate was little changed at 5.0 percent, the U.S. Bureau of Labor Statistics reported today. Employment gains occurred in professional and business services and in health care.
...
The change in total nonfarm payroll employment for July was revised down from +275,000 to +252,000, and the change for August was revised up from +151,000 to +167,000. With these revisions, employment gains in July and August combined were 7,000 less than previously reported. Over the past 3 months, job gains have averaged 192,000 per month.
...
In September, average hourly earnings for all employees on private nonfarm payrolls rose by 6 cents to $25.79. Over the year, average hourly earnings have risen by 2.6 percent.
emphasis added

Click on graph for larger image.

The first graph shows the monthly change in payroll jobs, ex-Census (meaning the impact of the decennial Census temporary hires and layoffs is removed - mostly in 2010 - to show the underlying payroll changes).

Total payrolls increased by 156 thousand in September (private payrolls increased 167 thousand).

Payrolls for July and August were revised down by a combined 7 thousand.

This graph shows the year-over-year change in total non-farm employment since 1968.

In September, the year-over-year change was 2.45 million jobs.  A solid gain.


The third graph shows the employment population ratio and the participation rate.

The Labor Force Participation Rate increased in September to 62.9%. This is the percentage of the working age population in the labor force.   A large portion of the recent decline in the participation rate is due to demographics.

The Employment-Population ratio increased to 59.8% (black line).

I'll post the 25 to 54 age group employment-population ratio graph later.

The fourth graph shows the unemployment rate.

The unemployment rate increased in September to 5.0%.

This was below expectations of 168,000 jobs. Still a decent report.

I'll have much more later ...

by Calculated Risk on 10/06/2016 07:24:00 PM

On Hurricane Matthew, here is the NHC site.

And here is the Miami radar.

And the Melbourne radar.

And for Jacksonville.

Best wishes to all.

Friday:
• At 8:30 AM ET, the Employment Report for September. The consensus is for an increase of 168,000 non-farm payroll jobs added in September, up from the 151,000 non-farm payroll jobs added in August. The consensus is for the unemployment rate to decline to 4.8%.

• At 3:00 PM, Consumer credit from the Federal Reserve.  The consensus is for a $16.8 billion increase in credit.

by Calculated Risk on 10/06/2016 04:22:00 PM

This is a key housing market to follow since Phoenix saw a large bubble / bust followed by strong investor buying.

Inventory was up 3.4% year-over-year in September.  This is the seventh consecutive month with a YoY increase in inventory, following fifteen consecutive months of YoY declines in Phoenix.

The Arizona Regional Multiple Listing Service (ARMLS) reports (table below):

1) Overall sales in September were up 6.3% year-over-year.

2) Cash Sales (frequently investors) were down to 20.2% of total sales.

3) Active inventory is now up 3.4% year-over-year.  

More inventory (a theme in 2014) - and less investor buying - suggested price increases would slow sharply in 2014.  And prices increases did slow in 2014, only increasing 2.4% according to Case-Shiller.

In 2015, with falling inventory, prices increased a little faster -  Prices were up 6.3% in 2015 according to Case-Shiller.

Now inventory is increasing a little again, and - if this trend continues in Phoenix - price increases will probably slow in Phoenix.    Prices in Phoenix are up 2.2% through July (about a 3.7% annual rate) - slower than in 2015.

September Residential Sales and Inventory, Greater Phoenix Area, ARMLS
	Sales	YoY Change Sales	Cash Sales	Percent Cash	Active Inventory	YoY Change Inventory
Sept-08	6,179	---	1,041	16.8%	54,4271	---
Sept-09	7,907	28.0%	2,776	35.1%	38,340	-29.6%
Sept-10	6,762	-14.5%	2,904	42.9%	45,202	17.9%
Sept-11	7,892	16.7%	3,470	44.0%	26,950	-40.4%
Sept-12	6,478	-17.9%	2,849	44.0%	21,703	-19.5%
Sept-13	6,313	-2.5%	2,106	33.4%	23,405	7.8%
Sept-14	6,252	-1.0%	1,609	25.7%	26,492	13.2%
Sept-15	6,980	11.6%	1,573	22.5%	23,396	-11.7%
Sept-16	7,421	6.3%	1,499	20.2%	24,195	3.4%
1 September 2008 probably includes pending listings

by Calculated Risk on 10/06/2016 12:45:00 PM

A few excerpts from Goldman Sachs' September Payroll Preview by economist Elad Pashtan:

We expect a 190k increase in nonfarm payroll employment in September, above consensus expectations for a 172k gain, and up from our preliminary forecast of 175k. Although payroll growth slowed to 155k last month, subdued employment gains are not uncommon in August, and the trend growth rate in payrolls still looks solid, with the trailing 3- and 6-month averages at 232k and 175k, respectively.
...
The unemployment rate is likely to decline to 4.8%, while average hourly earnings likely rose 0.3% in August and 2.7% over the past year.
...
Our above-consensus payroll forecast primarily reflects improving underlying labor market fundamentals during the course of the month. Initial jobless claims continued trending down towards post-crisis lows, and nearly all other employment indicators from the various regional and national manufacturing and service sector surveys turned up.
emphasis added

Here is my preview of the September employment report.

by Calculated Risk on 10/06/2016 11:24:00 AM

Major hurricane Matthew might cause severe damage on the east coast of Florida over the next couple of days.

From the NHC:

At 1100 AM EDT (1500 UTC), the eye of Hurricane Matthew was located near latitude 25.1 North, longitude 77.8 West. The eye is moving toward the northwest near 14 mph (22 km/h) between Andros Island and Nassau in the Bahamas. This general motion is expected to continue today with a turn toward the north-northwest tonight or early Friday. On the forecast track, Matthew should cross the northwestern Bahamas later today and move close to or over the east coast of the Florida peninsula through Friday night.

Reports form an Air Force plane indicate that the maximum sustained winds are near 140 mph (220 km/h) with higher gusts. Matthew is a category 4 hurricane on the Saffir-Simpson Hurricane Wind Scale. Some additional strengthening is possible, and Matthew should remain a Category 4 hurricane while it approaches the Florida coast.
emphasis added

Click on graph for larger image.

This image from the NHC shows the current forecast track for Hurricane Matthew.

The forecast track is for Matthew to rake the east coast of Florida and Georgia, and then - hopefully - turn out to the Atlantic.

Depending on the damage, we might see a spike in unemployment claims over the next few weeks related to the hurricane.

The following graph shows the 4-week moving average of weekly claims since 2000.

The dashed line on the graph is the current 4-week average.

Notice that there was a spike in claims following Hurricane Katrina in 2005, and also a smaller spike in claims related to Hurricane Sandy in 2012.

Hopefully Matthew will not cause severe damage.

by Calculated Risk on 10/06/2016 08:36:00 AM

The DOL reported:

In the week ending October 1, the advance figure for seasonally adjusted initial claims was 249,000, a decrease of 5,000 from the previous week's unrevised level of 254,000. The 4-week moving average was 253,500, a decrease of 2,500 from the previous week's unrevised average of 256,000. This is the lowest level for this average since December 8, 1973 when it was 252,250.

There were no special factors impacting this week's initial claims. This marks 83 consecutive weeks of initial claims below 300,000, the longest streak since 1970.

The previous week was unrevised.

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 253,500.

This was lower than the consensus forecast of 257,000. The low level of claims suggests relatively few layoffs.

by Calculated Risk on 10/05/2016 03:45:00 PM

On Friday at 8:30 AM ET, the BLS will release the employment report for September. The consensus, according to Bloomberg, is for an increase of 168,000 non-farm payroll jobs in September (with a range of estimates between 155,000 to 200,000, and for the unemployment rate to be unchanged at 4.9%.

The BLS reported 151,000 jobs added in August.

Here is a summary of recent data:

• The ADP employment report showed an increase of 154,000 private sector payroll jobs in September. This was below expectations of 170,000 private sector payroll jobs added. The ADP report hasn't been very useful in predicting the BLS report for any one month, but in general, this suggests employment growth somewhat below expectations.

• The ISM manufacturing employment index increased in September to 49.7%. A historical correlation between the ISM manufacturing employment index and the BLS employment report for manufacturing, suggests that private sector BLS manufacturing payroll jobs decreased about 20,000 in September. The ADP report indicated 6,000 manufacturing jobs lost in September.

The ISM non-manufacturing employment index increased in September to 57.2%. A historical correlation between the ISM non-manufacturing employment index and the BLS employment report for non-manufacturing, suggests that private sector BLS non-manufacturing payroll jobs increased about 265,000 in September.

Combined, the ISM indexes suggests employment gains of about 245,000.  This suggests employment growth well above expectations.

• Initial weekly unemployment claims averaged 256,000 in September, down from 263,000 in August. For the BLS reference week (includes the 12th of the month), initial claims were at 251,000, down from 261,000 during the reference week in August.

The decrease during the reference suggests fewer layoffs in September as compared to August.  This suggests a positive employment report.

• The final September University of Michigan consumer sentiment index increased to 91.2 from the August reading of 89.8. Sentiment is frequently coincident with changes in the labor market, but there are other factors too like gasoline prices and possibly politics.

• Conclusion: Unfortunately none of the indicators alone is very good at predicting the initial BLS employment report. The ADP report would suggest a report weaker than the consensus, and the ISM reports, unemployment claims, consumer sentiment all suggest stronger job growth.

My guess is the September report will be above the consensus forecast.

by Calculated Risk on 10/05/2016 12:32:00 PM

Reis reported that the vacancy rate for regional malls decreased to 7.8% in Q3 2016, from 7.9% in Q2, and down from 7.9% in Q3 2015. This is down from a cycle peak of 9.4% in Q3 2011.

For Neighborhood and Community malls (strip malls), the vacancy rate increased to 10.0% in Q3 2016 from 9.9% in Q2, and was unchanged year-over-year from 10.0% in Q3 2015. For strip malls, the vacancy rate peaked at 11.1% in Q3 2011.

Comments from Reis Economist Barbara Byrne Denham :

The national vacancy rate for neighborhood and community shopping centers increased to 10.0% in the third quarter. In contrast to last quarter, net absorption fell short of new construction although overall occupancy did increase. The vacancy rate for malls declined to 7.8%. For the second straight quarter, the two retail subtypes see-sawed in opposite directions.

The retail industry has suffered from store closures across the U.S. Reis has been tracking store closures for the larger, more high-profile brands across the country. The Reis database includes 280 store closures in 59 of the 80 primary retail metros that Reis tracks totaling 12.8 million square feet of closed stores across the U.S. The major brands of stores include Walmart, Kohls, Sports Authority, Pathmark, Superfresh, A&P, Waldbaums, Haggen and Kmart. Many of these closures were concentrated in a handful of metro areas including Chicago, Central NJ, Northern NJ, Philadelphia, Long Island, San Diego and Los Angeles – all of which had more than 400,000 square feet of store closures from 2015 through July of this year.

That being said, regional malls have outperformed neighborhood and community centers throughout the recovery as the class A malls cater to wealthier consumers. Neighborhood and community centers have lagged due to the slow growth in median household income that has kept a lid on discretionary spending over the last few years. But recent job growth along with the 2015 median income report showing sharp increases across the U.S. suggest that retail fortunes may improve somewhat after trailing the other property classes over the last five years.
...
In short, the retail market faces greater challenges from structural changes than from cyclical issues. Both neighborhood and community centers and regional malls face competition from newer and fresher retail concepts as well as e-commerce. With job growth and gains in median family income across the U.S., the retail recovery should continue. Some properties will continue to outperform others just as some markets will outperform others. We continue to expect vacancy rates for neighborhood and community centers to slowly drift lower and rent growth to increase at a slightly faster rate. Rent growth should stay positive for malls as well, but we expect little change in vacancy rates. As we have mentioned, the gap between the winners and losers at the property level should continue to widen over time.
emphasis added

Click on graph for larger image.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). The regional mall data starts in 2000. Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

Currently, both the strip mall and regional mall vacancy rates are mostly moving sideways at an elevated level.

Mall vacancy data courtesy of Reis.