by Calculated Risk on 4/09/2021 01:48:00 PM

Note that the forecasts of the automated systems (based on released data) are lower than the forecasts of economists. Economists are expecting March to be very strong.

From Merrrill Lynch:

We continue to track 7.0% for 1Q GDP growth. [Apr 9 estimate]
emphasis added

From Goldman Sachs:

We left our Q1 GDP tracking estimate unchanged at +7.5% (qoq ar). [Apr 9 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 6.0% for 2021:Q1 and 1.5% for 2021:Q2. [Apr 9 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2021 is 6.0 percent on April 9, down from 6.2 percent on April 7. [Apr 9 estimate]

by Calculated Risk on 4/09/2021 11:36:00 AM

There is discussion of another housing bubble.  I wouldn't call the current situation a "bubble".

Way back in early 2005, I wrote: Housing: Speculation is the Key

A bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value, but the real key for detecting a bubble is speculation ... Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the "bubble" bursts.

Maybe prices are too high based on fundamentals (due to extremely low supply and record low mortgage rates), but there is very little evidence of speculation (not like the loose lending of the housing bubble).

Ben Carlson discusses lending (and other issues) in Why This is Not Another Housing Bubble.

The lack of wild speculation doesn't mean house prices can't decline, but it means that we won't see cascading declines in prices like what happened when the housing bubble burst.  In the 2006 through 2011 period, as prices fell, and teaser rates and other "affordability products" expired - more and more homeowners were forced to sell (or just walk away).   That drove prices down 26% nationally from peak to trough, and much more in certain "bubble" cities like Las Vegas (down 62% from peak) and Phoenix (down 56%).

We might see some price declines, especially in some 2nd home areas that saw a surge in demand at the onset of the pandemic, but the recent buyers are all well qualified, and some price declines will not lead to forced selling.   So there is no threat to the financial system with widespread defaults.

On fundamentals: 

Every month, I post a price-to-rent graph based on 2004 paper by Fed economist John Krainer and researcher Chishen Wei: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0). This suggested prices were way too high during the housing bubble, and also suggests prices might be high now - but only about half the housing bubble.

If we factor in low rates, demographics, and if low supply persists (I think inventory will increase this year), maybe prices are only a little out of line.

Here is another measure - house prices to the Median Household income.

This graph uses the year end Case-Shiller house price index - and the nominal median household income through 2019 (from the Census Bureau).  2020 median income is estimated at a 5% gain.

This graph shows the ratio of house price indexes divided by the Median Household Income through 2020 (the HPI is first multiplied by 1000).

This uses the year end National Case-Shiller index since 1976 (December 2020 estimated).

House price appear elevated relative to incomes, but still well below the levels of the housing bubble.

From a historical perspective, house prices are high.  But lending standards have been solid, and we haven't seen significant speculation - so I wouldn't call this a bubble.

by Calculated Risk on 4/09/2021 08:53:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of April 6th.

From Black Knight: U.S. Sees Largest Weekly Forbearance Decline in Six Months

We continue to see great improvements in forbearance plan numbers, with this week showing the largest weekly decline in six months. The number of outstanding forbearances fell by 228,000 (-9.0%), largely driven by early forbearance entrants exiting their plans at or around the 12-month mark.

Significant improvements were seen across investor classes, with decline of 94,000 in FHA/VA plans, a 69,000 decline in GSE forbearances and portfolio/PLS plan volumes declining by 65,000 this week alone. Overall, an estimated 280,000 borrowers exited forbearance this week, representing more than half of all loans being reviewed for extension and removal.

Click on graph for larger image.

Forbearance plan starts also continue to improve, with an estimated 158,000 such starts (including re-starts) over the past four weeks, down 18 percent from the preceding four-week period. All in, some 2.3 million borrowers remain in forbearance as of April 6, representing 4.4% of all outstanding first-lien mortgage holders.

With an estimated 500,000 additional forbearance plans with scheduled expirations at the end of April, we could see additional improvements near the end of this month and into early May. We’ll keep an eye on the numbers and have another report on Friday, April 16.
emphasis added

The number of loans in forbearance continues to decline.

by Calculated Risk on 4/08/2021 07:25:00 PM

From SacRealtor.org: Sales volume up 25% over Feb., sales price over $480k

March closed with 1,292 sales, up 25% from the 1,034 sales in February. Compared to one year ago (1,170), the current figure is up 10.4%.
...
The Active Listing Inventory increased 9.4% from February to March, from 839 units to 918 units. Compared with March 2020 (1,658), inventory is down 44.6%. The Months of Inventory decreased from .8 Months to .7 Months. This figure represents the amount of time (in months) it would take for the current rate of sales to deplete the total active listing inventory.
...
The Median DOM (days on market) remained at 6 and the Average DOM decreased from 15 to 13. “Days on market” represents the days between the initial listing of the home as “active” and the day it goes “pending.” Of the 1,292 sales this month, 91.2% (1,178) were on the market for 30 days or less and 96.5% (1,246) were on the market for 60 days or less.
emphasis added

Click on graph for larger image.

This graph from the Sacramento Association of REALTORS® shows single family sales and inventory since February 2018. Usually inventory (red) was higher than sales (blue), but now there are more sales each month than inventory. Inventory declined sharply during the pandemic.

by Calculated Risk on 4/08/2021 04:09:00 PM

Note: I'm looking forward to not posting this daily! I've been posting this data daily for over a year, and I'll stop once all three of these criteria are met:
1) 70% of the population over 18 has had at least one dose of vaccine,
2) new cases are under 5,000 per day, and
3) hospitalizations are below 3,000.

According to the CDC, 174.9 million doses have been administered. 25.6% of the population over 18 is fully vaccinated, and 43.2% of the population over 18 has had at least one dose (111.4 million people have had at least one dose).

And check out COVID Act Now to see how each state is doing. 

Almost 5,000 US deaths were reported so far in April due to COVID.

Click on graph for larger image.

This graph shows the daily (columns) 7 day average (line) of positive tests reported.

Note: The ups and downs during the Winter surge were related to reporting delays due to the Thanksgiving and Christmas holidays.

This data is from the CDC.

The 7-day average is 64,151, up from 63,407 yesterday, and close to the summer surge peak of 67,337 on July 23, 2020.

The second graph shows the number of people hospitalized.

This data is also from the CDC.

The CDC cautions that due to reporting delays, the area in grey will probably increase.

The current 7-day average is 34,883, up from 34,613 reported yesterday, and well above the post-summer surge low of 23,000.

by Calculated Risk on 4/08/2021 02:38:00 PM

Note: I'm posting data for many local markets around the U.S. The story is the same everywhere ... inventory is at record lows.

From the New Hampshire Realtors for the entire state:

Closed sales Single family and Condos in March 2021 were 1,481, down 0.9% from 1,494 in March 2020.

Active Listings Single family and Condos in March 2021 were 1,576, down 64.3% from 4,414 in March 2020.

Months of Supply for Single family and Condos in March 2021 was 0.7 months, down from 2.2 months in March 2020.

by Calculated Risk on 4/08/2021 01:22:00 PM

From the Association of American Railroads (AAR) Rail Time Indicators. Graphs and excerpts reprinted with permission.

When the pandemic first began around mid-March 2020, firms across the country and across industries shut down or drastically reduced operations, leading to sharply lower volumes for many rail traffic categories. A year later, rail traffic has rebounded, leading to year-over-year volume percentage gains that in some cases reflect easier comparisons more than underlying market factors.

March’s rail traffic numbers are impacted by the easier comparisons. Total U.S. carloads were up 4.1% in March 2021 over March 2020, their first year-over-year monthly gain since January 2019. Total carloads in the last two weeks of March were up 7.3% over the comparable weeks of 2020.

For intermodal, U.S. volume in March 2021 was up 24.0% over March 2020. That’s the biggest monthly gain ever for intermodal; it includes a 28% increase in the last two weeks of March. March’s intermodal gains are not solely a function of easy comparisons, though: March 2021 was the highest volume March ever for intermodal and the sixth-best intermodal month overal
emphasis added

Click on graph for larger image.

This graph from the Rail Time Indicators report shows the six week average of U.S. Carloads in 2019, 2020 and 2021:

Total carloads averaged 231,232 in March 2021. That’s a higher weekly average than March 2020, but otherwise it’s the lowest weekly average for any March since 1988, when our data begin. For the first three months of 2021, total U.S. rail carloads were 2.6% (77,267 carloads) lower than they were in the first three months of 2020.

The second graph shows the six week average of U.S. intermodal in 2019, 2020 and 2021: (using intermodal or shipping containers):

U.S. intermodal originations totaled 1.43 million in March 2021, up 24.0%, or 276,781 containers and trailers, over March 2020 and up 8.0% over March 2019. March 2021 marks the eighth-straight year-over-year gain for intermodal following 18 straight declines.

Note that rail traffic was weak prior to the pandemic, however intermodal has come back strong.

by Calculated Risk on 4/08/2021 11:30:00 AM

Note: The year-over-year occupancy comparisons are easy, since occupancy declined sharply at the onset of the pandemic. However, occupancy is still down significantly from normal levels.

The occupancy rate is down 16% compared to the same week in 2019.

From CoStar: STR: US Hotel Occupancy Flat From Prior Week

U.S. hotel occupancy remained flat from the previous week, while the country’s ADR and RevPAR levels were its highest since the beginning of March 2020, according to STR‘s latest weekly data through April 3, 2021.

March 28 through April 3, 2021:

• Occupancy: 57.9%
• Average daily rate (ADR): US$112.76
• Revenue per available room (RevPAR): US$65.33

The occupancy level was 1 point below the pandemic peak reached two weeks prior. The RevPAR value represented 73.1% of the comparable 2019 level, which is the closest the U.S. has come to RevPAR recovery territory in STR’s Market Recovery Monitor.
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 2021, black is 2020, blue is the median, and dashed light blue is for 2009 (the worst year since the Great Depression for hotels prior to 2020).

Occupancy has increased to 2009 levels - and 2009 was horrible for hotels.

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

by Calculated Risk on 4/08/2021 08:38:00 AM

The DOL reported:

In the week ending April 3, the advance figure for seasonally adjusted initial claims was 744,000, an increase of 16,000 from the previous week's revised level. The previous week's level was revised up by 9,000 from 719,000 to 728,000. The 4-week moving average was 723,750, an increase of 2,500 from the previous week's revised average. The previous week's average was revised up by 2,250 from 719,000 to 721,250.
emphasis added

This does not include the 151,752 initial claims for Pandemic Unemployment Assistance (PUA) that was down from 237,065 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 increased to 723,750.

The previous week was revised up.

Regular state continued claims decreased to 4,067,784 (SA) from 4,200,238 (SA) the previous week.

Note: There are an additional 7,553,628 receiving Pandemic Unemployment Assistance (PUA) that increased from 7,350,339 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 5,633,595 receiving Pandemic Emergency Unemployment Compensation (PEUC) up from 5,516,487.

Weekly claims were higher than the consensus forecast.

by Calculated Risk on 4/07/2021 09:00:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for a decrease to 700 thousand from 719 thousand last week.

• AT 12:00 PM, Discussion, Fed Chair Jerome Powell, The Global Economy, At the International Monetary Fund Debate on the Global Economy (Watch live)