by Calculated Risk on 1/06/2020 05:33:00 PM

SUVs to the left of me, SUVs to the right.  It made me look at the changing mix of vehicle sales over time (between passenger cars and light trucks / SUVs).

The first graph below shows the mix of sales since 1976 (Blue is cars, Red is light trucks and SUVs) through December 2019.


Click on graph for larger image.

The mix has changed significantly. Back in 1976, most light vehicles were passenger cars - however car sales have trended down over time.

Note that the big dips in sales are related to economic recessions (early '80s, early '90s, and the Great Recession of 2007 through mid-2009).

The second graph shows the percent of light vehicle sales between passenger cars and trucks / SUVs.

Over time the mix has changed toward more and more light trucks and SUVs.

Only when oil prices are high, does the trend slow or reverse.

Recently oil prices have been somewhat steady, and the percent of light trucks and SUVs is up to 73%.

by Calculated Risk on 1/06/2020 12:41:00 PM

The BEA released their estimate of December vehicle sales this morning. The BEA estimated light vehicle sales of 16.70 million SAAR in December 2019 (Seasonally Adjusted Annual Rate), down 2.3% from the November sales rate, and down 3.9% from December 2019.

Light vehicle sales in 2019 were 16.97 million, down 1.4% from 17.21 million in 2018.

Click on graph for larger image.

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

Note: The GM strike might have impacted sales in October.

A small decline in sales last year isn't a concern - I think sales will move mostly sideways at near record levels.

This means the economic boost from increasing auto sales is over (from the bottom in 2009, auto sales boosted growth every year through 2016).

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

Note: dashed line is current estimated sales rate of 16.70 million SAAR.

Sales have been decreasing slightly, but are still at a high level.

The third graph shows annual light vehicle sales since 1976.

2019 was the 7th best year for vehicle sales following 2016 (best year), 2015, 2000, 2018, 2017 and 2001.

by Calculated Risk on 1/06/2020 11:29:00 AM

Here is another monthly update on framing lumber prices.   Lumber prices declined sharply from the record highs in early 2018, and have increased a little lately.

This graph shows two measures of lumber prices: 1) Framing Lumber from Random Lengths through Jan 3, 2020 (via NAHB), and 2) CME framing futures.

Click on graph for larger image in graph gallery.

Right now Random Lengths prices are up 14% from a year ago, and CME futures are up 25% year-over-year.

There is a seasonal pattern for lumber prices, and usually prices will increase in the Spring, and peak around May, and then bottom around October or November - although there is quite a bit of seasonal variability.

The trade war was a factor in the sharp decline with reports that lumber exports to China had declined by 40%.   Now, with a pickup in housing, lumber prices are moving up again.

by Calculated Risk on 1/06/2020 09:44:00 AM

Reis reported that the office vacancy rate was at 16.8% in Q4, unchanged from 16.8% in Q3 2019. This is up from 16.7% in Q4 2018, and down from the cycle peak of 17.6%.

From Reis Senior Economist Barbara Byrne Denham:

The office vacancy rate was unchanged at 16.8% in the fourth quarter. It was 16.7% in the fourth quarter of 2018 and 16.4% at year-end 2017.

Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.5% in the fourth quarter. At $34.31 per square foot (asking) and $27.87 per square foot (effective), the average rents have increased 2.6% and 2.7%, respectively, from the fourth quarter of 2018. This was close to the 2.7% growth rate in 2018 and above the 1.8% growth rate in 2017.

Net absorption jumped to 12.2 million SF in the quarter, 35% above the 9.0 million SF in the third quarter. Likewise, construction was 12.5 million SF, 6% higher than the 11.8 million SF completed in the third quarter. With new completions of just under 40 million SF in all of 2019, overall office supply growth trailed the 2018 addition of 49 million SF. However, net absorption of 30.1 million SF in 2019 was much stronger than the 24.0 million SF in 2018. Nevertheless, vacancy is 0.1% higher than a year ago.
...
Many remain concerned about the fate of WeWork’s occupancies as the co-working company had over-expanded and may need to reconsider some of its office leases. This could raise vacancies in a few metros, but it’s too early to draw any conclusions.

The 2019 results extend the protracted expansion to nine years – a near decade that has been dogged by sluggish growth relative to both the apartment sector and historical expansions. The 16.8% vacancy rate is one-third higher than the low vacancy of 12.6% in 2007 and more than twice the rate (8.3%) in 2000. Likewise, annual rent growth of 2.7% is above the low national inflation rate of 1.8%, but well below peak rent growth of 10.5% and 12.3% in those respective years.

Click on graph for larger image.

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

Reis reported the vacancy rate was at 16.8% in Q4.  The office vacancy rate had been mostly moving sideways at an elevated level, but has increased over the last two years.

Office vacancy data courtesy of Reis.

by Calculated Risk on 1/05/2020 07:06:00 PM

Weekend:
• Schedule for Week of January 5, 2020

Monday:
• Early: Reis Q4 2019 Office Survey of rents and vacancy rates.

From CNBC: Pre-Market Data and Bloomberg futures: S&P 500 are down 13 and DOW futures are down 120 (fair value).

Oil prices were up over the last week with WTI futures at $63.65 per barrel and Brent at $69.31 barrel.  A year ago, WTI was at $48, and Brent was at $56 - so oil prices are up about 30% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.58 per gallon. A year ago prices were at $2.23 per gallon, so gasoline prices are up 35 cents year-over-year.

by Calculated Risk on 1/05/2020 01:27:00 PM

From HotelNewsNow.com: 2019’s weak growth trajectory to continue in Q1 2020

“Q1 2020 should see the fourth consecutive quarterly decline in the national occupancy level and the largest such decline … since Q3 2018,” [said] Mark Woodworth, senior managing director and head of lodging research for CBRE Hotel’s Americas Research …

For Q1 2020, STR is projecting a 0.6% increase in RevPAR, pushed up exclusively by average daily rate, which is expected to increase 1.1% year over year as occupancy decreases 0.5%.
emphasis added

From HotelNewsNow.com: STR: US hotel results for week ending 28 December

The U.S. hotel industry reported negative year-over-year results in the three key performance metrics during the week of 22-28 December 2019, according to data from STR.

In comparison with the week of 23-29 December 2018, the industry recorded the following:

• Occupancy: -4.9% to 48.5%
• Average daily rate (ADR): -2.6% to US$127.92
• Revenue per available room (RevPAR): -7.4% to US$62.00
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 2019, dash light blue is 2018 (record year), blue is the median, and black is for 2009 (the worst year probably since the Great Depression for hotels).

The average occupancy rate in 2019 was just behind the record rate in 2018 and essentially tied with 2017.   Another solid year for hotels.

Seasonally, the 4-week average of the occupancy rate will decline into January.

Data Source: STR, Courtesy of HotelNewsNow.com

by Calculated Risk on 1/04/2020 08:11:00 AM

The key report this week is the December employment report on Friday.

Also the Q4 quarterly Reis surveys for office and malls will be released this week.

----- Monday, Jan 6th -----
Early: Reis Q4 2019 Office Survey of rents and vacancy rates.

----- Tuesday, Jan 7th -----
8:30 AM: Trade Balance report for November from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. 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.

The consensus is the trade deficit to be $43.9 billion.  The U.S. trade deficit was at $47.2 billion in October.

10:00 AM: the ISM non-Manufacturing Index for December.  The consensus is for an increase to 54.5 from 53.9..

Early: Reis Q4 2019 Mall Survey of rents and vacancy rates.

----- Wednesday, Jan 8th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 156,000 payroll jobs added in December, up from 67,000 added in November.

----- Thursday, Jan 9th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 222,000 initial claims, unchanged from 222,000 last week.

----- Friday, Jan 10th -----
8:30 AM: Employment Report for December.   The consensus is for 160,000 jobs added, and for the unemployment rate to be unchanged at 3.5%.

There were 266,000 jobs added in November, and the unemployment rate was at 3.5%.

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

In November, the year-over-year change was 2.204 million jobs.

by Calculated Risk on 1/03/2020 01:00:00 PM

From Merrill Lynch

4Q tracking rose to 2.0% qoq saar, boosted by trade and inventories data. [Jan 3 estimate]
emphasis added

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 1.1% for 2019:Q4 and 1.0% for 2020:Q1. [Jan 3 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2019 is 2.3 percent on January 3, unchanged from December 23. [Jan 3 estimate]

CR Note: These estimates suggest real GDP growth will be between 1.1% and 2.3% annualized in Q4.

by Calculated Risk on 1/03/2020 11:36:00 AM

From the Census Bureau reported that overall construction spending increased in November:

Construction spending during November 2019 was estimated at a seasonally adjusted annual rate of $1,324.1 billion, 0.6 percent above the revised October estimate of $1,316.8 billion. The November figure is 4.1 percent above the November 2018 estimate of $1,271.4 billion. During the first eleven months of this year, construction spending amounted to $1,201.6 billion, 0.8 percent below the $1,211.8 billion for the same period in 2018.
emphasis added

Both private and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $985.5 billion, 0.4 percent above the revised October estimate of $981.1 billion. ...

In November, the estimated seasonally adjusted annual rate of public construction spending was $338.6 billion, 0.9 percent above the revised October estimate of $335.7 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential spending had been increasing - but turned down in the 2nd half of 2018.  Now it is increasing again, but is still 21% below the bubble peak.

Non-residential spending is 8% above the previous peak in January 2008 (nominal dollars).

Public construction spending is 4% above the previous peak in March 2009, and 29% above the austerity low in February 2014.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 3%. Non-residential spending is up slightly year-over-year. Public spending is up 12% year-over-year.

This was above consensus expectations, and construction spending for September and October were revised up. A strong report.

by Calculated Risk on 1/03/2020 11:12:00 AM

Reis reported that the apartment vacancy rate was at 4.7% in Q4 2019, up from 4.6% in Q3, and down from 4.8% in Q4 2018. The vacancy rate peaked at 8.0% at the end of 2009, and bottomed at 4.1% in 2016.

From economist Barbara Byrne Denham at Reis:

The apartment vacancy rate increased to 4.7% from 4.6% in the third quarter. It was 4.8% in the fourth quarter of 2018 and 4.6% at year-end 2017.

Both the national average asking rent and effective rent, which nets out landlord concessions, increased 0.5% in the fourth quarter. At $1,498 per unit (asking) and $1,426 per unit (effective), the average rents have increased 3.7% and 3.8%, respectively, from the fourth quarter of 2018. This was the lowest annual growth rate in more than two years.

Net absorption of 21,500 units was lower than the previous quarter’s absorption of 46,511 units. Likewise, construction was 30,159 units, lower than the 51,992 completions in the third quarter. With new completions of 176,565 units in 2019, overall apartment supply growth fell well short of the 2018 addition of 265,041 units. Likewise, net absorption of 177,599 units in 2019 fell short of the 2018 total of 235,786 units.
...
Demand for apartments should remain healthy, although it could face new competition from the housing market that could accelerate given the rosier economy and very low mortgage rates. As we have stated in previous reports, the housing vs. apartment markets are not a zero-sum game. As long as job growth remains healthy, the demand for both will stay positive shoring up home prices and rents equally.
emphasis added

Click on graph for larger image.

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Reis is just for large cities.

The vacancy rate has mostly moved sideways for the last two years - after increasing from the low in 2016.

Apartment vacancy data courtesy of Reis.