by Calculated Risk on 2/18/2021 09:59:00 AM

Earlier: Housing Starts decreased to 1.580 Million Annual Rate in January

Total housing starts in January were below expectations, and starts in November and December were revised down, combined. Single family starts decreased in January, but were still up sharply year-over-year - and excluding the last three months - were at the highest level since 2007. 

However, the volatile multi-family sector is down significantly year-over-year (apartments are under  pressure from COVID).

The housing starts report showed starts were down 6.0% in January compared to December, and starts were down 2.3% year-over-year compared to January 2020.

Single family starts were up 17% year-over-year.  Low mortgage rates and limited existing home inventory have given a boost to single family housing starts.

The first graph shows the month to month comparison for total starts between 2019 (blue) and 2020 (red). 

Click on graph for larger image.

Starts were down 2.3% in January compared to January 2020.

A key point: Housing starts averaged 1.590 million SAAR in the three months prior to the pandemic. That is about the same as January 2021 (although the mix changed to more single family). 2020 was off to a strong start before the pandemic, and with low interest rates and little competing existing home inventory, starts finished the year strong.

The year-over-year comparison will be difficult again in February - and then the comparisons will be easy in March, April and May.  

Last month I noted "Don't be surprised if starts are down year-over-year sometime over the next two months."   This small year-over-year decline in total starts was not a surprise.

Below is an update to the graph comparing multi-family starts and completions. Since it usually takes over a year on average to complete a multi-family project, there is a lag between multi-family starts and completions. Completions are important because that is new supply added to the market, and starts are important because that is future new supply (units under construction is also important for employment).

These graphs use a 12 month rolling total for NSA starts and completions.

The blue line is for multifamily starts and the red line is for multifamily completions.

The rolling 12 month total for starts (blue line) increased steadily for several years following the great recession - then mostly moved sideways.  Completions (red line) had lagged behind - then completions caught up with starts- then starts picked up a little again late last year, but have fallen off with the pandemic.

The last graph shows single family starts and completions. It usually only takes about 6 months between starting a single family home and completion - so the lines are much closer. The blue line is for single family starts and the red line is for single family completions.

Single family starts are getting back to more normal levels, but I still expect some further increases in single family starts and completions on a rolling 12 month basis.

by Calculated Risk on 2/18/2021 08:49:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in January were at a seasonally adjusted annual rate of 1,580,000. This is 6.0 percent below the revised December estimate of 1,680,000 and is 2.3 percent below the January 2020 rate of 1,617,000. Single-family housing starts in January were at a rate of 1,162,000; this is 12.2 percent below the revised December figure of 1,323,000. The January rate for units in buildings with five units or more was 402,000.

Building Permits:
Privately-owned housing units authorized by building permits in January were at a seasonally adjusted annual rate of 1,881,000. This is 10.4 percent above the revised December rate of 1,704,000 and is 22.5 percent above the January 2020 rate of 1,536,000. Single-family authorizations in January were at a rate of 1,269,000; this is 3.8 percent above the revised December figure of 1,223,000. Authorizations of units in buildings with five units or more were at a rate of 557,000 in January.
emphasis added

Click on graph for larger image.

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

Multi-family starts (red, 2+ units) increased in January compared to December.   Multi-family starts were down 33% year-over-year in January.

Single-family starts (blue) decreased in January, and were up 17% year-over-year.   

The second graph shows total and single unit starts since 1968.

The second graph shows the huge collapse following the housing bubble, and then eventual recovery (but still historically low).

Total housing starts in January were well below expectations, and starts in November and December were revised down, combined.

I'll have more later …

by Calculated Risk on 2/18/2021 08:38:00 AM

The DOL reported:

In the week ending February 13, the advance figure for seasonally adjusted initial claims was 861,000, an increase of 13,000 from the previous week's revised level. The previous week's level was revised up by 55,000 from 793,000 to 848,000. The 4-week moving average was 833,250, a decrease of 3,500 from the previous week's revised average. The previous week's average was revised up by 13,750 from 823,000 to 836,750.
emphasis added

This does not include the 516,299 initial claims for Pandemic Unemployment Assistance (PUA) that was up from 341,872 the previous week.

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 833,250.

The previous week was revised up.

The second graph shows seasonally adjust continued claims since 1967 (lags initial by one week).

At the worst of the Great Recession, continued claims peaked at 6.635 million, but then steadily declined.

Regular state continued claims decreased to 4,494,000 (SA) from 4,558,000 (SA) the previous week and will likely stay at a high level until the crisis abates.

Note: There are an additional 7,685,389 receiving Pandemic Unemployment Assistance (PUA) that decreased from 7,943,448 the previous week (there are questions about these numbers). This is a special program for business owners, self-employed, independent contractors or gig workers not receiving other unemployment insurance.  And an additional 4,061,305 receiving Pandemic Emergency Unemployment Compensation (PEUC) down from 4,779,341.

Weekly claims were much higher than the consensus forecast, and the previous week was revised up sharply.

by Calculated Risk on 2/17/2021 09:20:00 PM

The Arizona Regional Multiple Listing Service (ARMLS) reports ("Stats Report"):

1) Overall sales were at 7,066 in January, up 11.8% from 6,328 in January 2020.

2) Active inventory was at 4,867, down 58% from 11,602 in January 2020.

3) Months of supply decreased to 1.34 in January from 2.54 in January 2020. This is very low.

Sales are reported at the close of escrow, so these sales were mostly signed in November and December.

by Calculated Risk on 2/17/2021 09:12:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for a decrease to 780 thousand from 793 thousand last week.

• Also at 8:30 AM, Housing Starts for January. The consensus is for 1.655 million SAAR, down from 1.669 million SAAR.

• Also at 8:30 AM, the Philly Fed manufacturing survey for February. The consensus is for a reading of 19.8, down from 26.5.

by Calculated Risk on 2/17/2021 07:18:00 PM

SPECIAL NOTE: The Covid Tracking Project will end daily updates on March 7th. Heroes that filled a critical void! Quality government data will likely be available soon.

From Bloomberg on vaccinations as of Feb 16th.

"In the U.S., more Americans have now received at least one dose than have tested positive for the virus since the pandemic began. So far, 56.1 million doses have been given, according to a state-by-state tally. In the last week, an average of 1.67 million doses per day were administered."

Here is the CDC COVID Data Tracker. This site has data on vaccinations, cases and more.

The US is averaged 1.5 million tests per day over the last week. Based on the experience of other countries, for adequate test-and-trace (and isolation) to reduce infections, the percent positive needs to be well under 5% (probably close to 1%), so the US has far too many daily cases - and percent positive - to do effective test-and-trace.

There were 1,338,441 test results reported over the last 24 hours.

There were 66,089 positive tests.

Almost 48,000 US deaths have been reported in February. See the graph on US Daily Deaths here.

This data is from the COVID Tracking Project.

And check out COVID Act Now to see how each state is doing. (updated link to new site)

Click on graph for larger image.

This graph shows the 7 day average of positive tests reported and daily hospitalizations. 

The dashed line is the previous peak for hospitalizations (almost back to the summer peak level).

The percent positive over the last 7 days was 5.2%.  The percent positive is calculated by dividing positive results by total tests (including pending).

Both cases and hospitalizations have peaked, but are still above the previous peaks.  

by Calculated Risk on 2/17/2021 04:29:00 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 6.48 million in January, down 4.1% from December’s preliminary pace and up 19.6% from last January’s seasonally adjusted pace. Unadjusted sales should show a smaller YOY gain, reflecting this January’s lower business day count relative to last January’s.

Local realtor reports, as well as reports from national inventory trackers, suggest that the YOY decline in the inventory of existing homes for sale was larger in January than in December, though what that means for the NAR inventory estimate is unclear. As I’ve noted before, the inventory measure in most publicly-released local realtor/MLS reports excludes listings with pending contracts, but that is not the case for many of the reports sent to the NAR (referred to as the “NAR Report!”), Since the middle of last Spring inventory measures excluding pending listings have fallen much more sharply than inventory measures including such listings, and this latter inventory measure understates the decline in the effective inventory of homes for sale over the last several months.

Finally, local realtor/MLS reports suggest the median existing single-family home sales price last month was up by about 13.7% from last January.

(Note that this month’s EHS report will include benchmark seasonal adjustment revisions.)

CR Note: The National Association of Realtors (NAR) is scheduled to release January existing home sales on Friday, February 19, 2021 at 10:00 AM ET. The consensus is for 6.60 million SAAR.

by Calculated Risk on 2/17/2021 11:19:00 AM

From the NY Fed: Total Household Debt Increased in Q4 2020, Newly Originated Mortgages Reach Record High

The Federal Reserve Bank of New York's Center for Microeconomic Data today issued its Quarterly Report on Household Debt and Credit. The report shows that total household debt increased by $206 billion (1.4%) to $14.56 trillion in the fourth quarter of 2020, driven in part by a steep increase in mortgage originations. The total debt balance is now $414 billion higher than the year prior.
...
Mortgage balances—the largest component of household debt—surpassed $10 trillion in the fourth quarter, increasing by $182 billion to $10.04 trillion at the end of December. While credit card balances increased by $12 billion over the quarter, they were $108 billion lower than they had been at the end of 2019, the largest year over year decline since the series began in 1999. This overall decline is consistent with continued weakness in consumer spending and revolving balance paydowns by card holders.

Auto and student loan balances increased by $14 billion and $9 billion, respectively. In total, non-housing balances (including credit card, auto loan, student loan, and other debts) increased by $37 billion during the fourth quarter but remained below end-2019 levels.

Newly originated mortgages reached a record high and auto loan originations reached their second highest quarterly volume since 2000. Mortgage originations, which include refinances, were at $1.2 trillion, surpassing in nominal terms the volumes seen during the historic refinance boom in 2003Q3. Auto loan originations, which includes both loans and leases, were down slightly from the record high seen in the third quarter but were at the second highest level for the series, at $162 billion.
emphasis added

Click on graph for larger image.

Here are two graphs from the report:

The first graph shows aggregate consumer debt increased in Q4.  Household debt previously peaked in 2008, and bottomed in Q3 2013.

From the NY Fed:

Aggregate household debt balances increased by $206 billion in the fourth quarter of 2020, a 1.4% rise from 2020Q3, and now stand at $14.56 trillion. Balances are $414 billion higher than at the end of 2019.

The second graph shows the percent of debt in delinquency.

The overall delinquency rate decreased in Q4.  From the NY Fed:

Aggregate delinquency rates have continued to decline in the fourth quarter and continuing what was seen in the second and third, reflecting an uptake in forbearances (provided by both the CARES Act and voluntarily offered by lenders), which protect borrowers’ credit records from the reporting of skipped or deferred payments. As of late December, 3.2% of outstanding debt was in some stage of delinquency, a 0.2 percentage point decrease from the third quarter, and 1.6 percentage points lower than the rate observed in the fourth quarter of 2019 and before the Covid pandemic hit the United States. Of the $462 billion of debt that is delinquent, $349 billion is seriously delinquent (at least 90 days late or “severely derogatory”, which includes some debts that have been removed from lenders’ books but upon which they continue to attempt collection).

The uptake in forbearances continues to be visible in the delinquency transition rates for mortgages. The share of mortgages that transitioned to early delinquency ticked down to a low 0.4%, as the option to enter forbearance remained. Meanwhile, 54% of loans in early delinquency transitioned to current. Foreclosures remain on pause for most loans due to the CARES-provisioned moratorium, and the fourth quarter saw only 14,000 new foreclosure starts.

There is much more in the report.

by Calculated Risk on 2/17/2021 10:04:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 84, up from 83 in January. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Confidence: High Demand Offsets Higher Costs – For Now

Strong buyer demand helped offset supply chain challenges and a surge in lumber prices as builder confidence in the market for newly built single-family homes inched up one point to 84 in February, according to the latest NAHB/Wells Fargo Housing Market Index (HMI).

Lumber prices have been steadily rising this year and hit a record high in mid-February, adding thousands of dollars to the cost of a new home and causing some builders to abruptly halt projects at a time when inventories are already at all-time lows.

However, demand conditions remain solid due to demographics, low mortgage rates and the suburban shift to lower cost markets, but we expect to see some cooling in growth rates for residential construction in 2021 due to cost factors, supply chain issues and regulatory risks.
...
The HMI index gauging current sales conditions held steady at 90, while the component measuring sales expectations in the next six months fell three points to 80. The gauge charting traffic of prospective buyers rose four points to 72.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose two points to 78, the Midwest fell one point to 81, the South dropped two points to 84 and the West posted a two-point loss to 93.

Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was slightly above the consensus forecast, and a very strong reading.

Housing and homebuilding have been one of the best performing sectors during the pandemic.

by Calculated Risk on 2/17/2021 09:22:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production increased 0.9 percent in January. Manufacturing output rose 1.0 percent, about the same as its average gain over the previous five months. Mining production advanced 2.3 percent, while the output of utilities declined 1.2 percent. At 107.2 percent of its 2012 average, total industrial production in January was 1.8 percent lower than its year-earlier level. Capacity utilization for the industrial sector increased 0.7 percentage point in January to 75.6 percent, a rate that is 4.0 percent below its long-run (1972–2020) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April, but still below the level in February 2020.

Capacity utilization at 75.6% is 4.0% below the average from 1972 to 2019.

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

The second graph shows industrial production since 1967.

Industrial production increased in January to  107.2. This is 1.9% below the February 2020 level.

The change in industrial production was above consensus expectations.