by Calculated Risk on 11/19/2021 12:55:00 PM

Today, in the Real Estate Newsletter: 5th Look at Local Housing Markets in October

Excerpt:

This is the fifth look at local markets in October. This update adds Alabama, Austin, Boston, Charlotte, Indiana, Minneapolis, Phoenix, and Rhode Island.
...
Here is a summary of active listings for the housing markets that have reported so far in October. For these markets, inventory was down 6.5% in October MoM from September, and down 24.1% YoY.

Of the markets that have reported so far, inventories in Jacksonville and San Diego are at record lows. Sacramento and Washington, D.C. are the only markets so far with inventory up YoY in October (Austin is essentially unchanged YoY).

Inventory almost always declines seasonally in October, so the MoM decline is not a surprise. Last month, these markets were down 22.1% YoY, so the YoY decline in October is slightly larger than in September. This is not indicating a slowing market.

In California, the C.A.R. reported inventory was down 18.3% YoY, but this isn’t included in the table below since C.A.R. doesn’t report monthly numbers.

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by Calculated Risk on 11/19/2021 11:18:00 AM

From BofA:

We continue to track 6% qoq saar for 4Q GDP growth. [November 19 estimate]
emphasis added

From Goldman Sachs

We left our Q4 GDP tracking estimate unchanged on a rounded basis at +5.0% (qoq ar). [November 17 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2021 is 8.2 percent on November 17, down from 8.7 percent on November 16. [November 17 estimate]

by Calculated Risk on 11/19/2021 08:14:00 AM

This data is as of November 16th.

From Andy Walden at Black Knight: Mid-November Forbearance Exits Low and Slow

In what has become a familiar pattern, the number of active forbearance plans held relatively steady entering the third week of November.

According to our McDash Flash daily forbearance tracking dataset, the number of active forbearance plans increased by 2,000 (0.2%) this week. Modest declines among FHA/VA loans (-2,000) and GSE (-1,000) were offset by a 5,000 rise in plan volumes among portfolio and PLS mortgages as plan activity hit its lowest level since mid-August. Start volumes edged higher, driven by an increase in new plans among FHA/VA loans, which hit their highest level since early October.

As of November 16, 1.01 million mortgage holders remain in COVID-19 related forbearance plans, representing 1.9% of all active mortgages, including 1.2% of GSE, 3.1% of FHA/VA and 2.4% of portfolio held and privately securitized loans.

Click on graph for larger image.

Overall, the number of forbearance plans is still down by 230,000 (-18%) from the same time last month, with the potential for additional improvements as we enter December. More than 200,000 plans remain with October/November reviews for extension/removal and nearly 300,000 more are slated for review in December – half of which are expected to be reaching their final expirations.
emphasis added

by Calculated Risk on 11/18/2021 08:18:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 446,250,342, as of a week ago 434,486,889, or 1.47 million doses per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	58.9%	58.5%	≥70.0%1
Fully Vaccinated (millions)	195.7	194.4	≥2321
New Cases per Day3🚩	88,482	76,223	≤5,0002
Hospitalized3🚩	40,579	40,221	≤3,0002
Deaths per Day3	1,032	1,057	≤502
1 Minimum to achieve "herd immunity" (estimated between 70% and 85%). 2my goals to stop daily posts, 37 day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7 day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

IMPORTANT: For "herd immunity" most experts believe we need 70% to 85% of the total population fully vaccinated (or already had COVID).  Note: COVID will probably stay endemic (at least for some time).

KUDOS to the residents of the 5 states that have achieved 70% of total population fully vaccinated: Vermont at 72.2%, Rhode Island, Connecticut, Maine, and Massachusetts at 70.6% .

KUDOS also to the residents of the 16 states and D.C. that have achieved 60% of total population fully vaccinated: New York at 67.8%, New Jersey, Maryland, Washington, Virginia, New Hampshire, Oregon, District of Columbia, New Mexico, Colorado, California, Minnesota, Pennsylvania,  Illinois, Delaware, Florida, and Hawaii at 60.5%.

The following 19 states have between 50% and 59.9% fully vaccinated: Wisconsin at 59.1%, Nebraska, Iowa, Utah, Michigan, Texas, Kansas, Arizona, Nevada, South Dakota, North Carolina, Alaska, Ohio, Kentucky, Montana, Oklahoma, South Carolina, Missouri and Indiana at 50.3%.

Next up (total population, fully vaccinated according to CDC) are Tennessee at 49.1%, Georgia at 49.1%, Arkansas at 48.8%, Louisiana at 48.4% and North Dakota at 48.3%.

Click on graph for larger image.

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

by Calculated Risk on 11/18/2021 04:50:00 PM

Notes: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

Also, incoming port traffic is backed up significantly in the LA area with numerous ships at anchor waiting to unload.

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12 month average.

Click on graph for larger image.

On a rolling 12 month basis, inbound traffic was down 0.5% in October compared to the rolling 12 months ending in September.   Outbound traffic was down 1.4% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in February or March depending on the timing of the Chinese New Year.

2021 started off incredibly strong for imports - and with the backlog of ships, will probably continue strong into 2022 (no break again in February or March).

Imports were down 6% YoY in October (recovered last year following the early months of the pandemic), and exports were down 15% YoY.

by Calculated Risk on 11/18/2021 03:17:00 PM

From housing economist Tom Lawler:

Investor Share of Home Purchases Surges

Recent reports from Redfin and Corelogic indicate that the investor share of home purchases has surged this year.

Here is a chart from a Redfin report released on November 15th.

Click on graph for larger image.

Redfin identified an “investor” as follows:

We define an investor as any buyer whose name includes at least one of the following keywords: LLC, Inc, Trust, Corp, Homes. We also define an investor as any buyer whose ownership code on a purchasing deed includes at least one of the following keywords: association, corporate trustee, company, joint venture, corporate trust. This data may include purchases made through family trusts for personal use.

Using this methodology, Redfin would probably miss small, “mom and pop” investors.

Redfin also noted that the share of investor purchases that were single-family homes hit a record high last quarter, and that lower-priced homes made up a significantly lower share of investor purchases than in previous quarters.

In a report released October 6th, Corelogic issued a report showing that the investor share of home purchases surged to a record high in the second quarter of the year (their data only go through June).

Here are the data from a chart in their report.

CoreLogic’s share of investor purchases is larger than Redfin’s, apparently because their methodology identifies smaller investors while Redfin’s does not.

CoreLogic also noted that there has been an especially large increase in “large” investor purchases, and that investors purchases of higher priced homes had increased significantly.

These data seem to confirm anecdotal reports of huge investments in private equity and other institutional investors in the single-family rental market this year.

What is interesting, and perhaps a bit disturbing, about these data is that the surge in investor buying happened (1) AFTER home prices had surged; and (2) at a time when the inventory of homes for sale was exceptionally low.

Second Home Buying Off from Post-Pandemic High But Still Way Above Pre-Pandemic Levels

In a recently-released report, Redfin using analysis of mortgage-rate lock data from real estate analytics firm Optimal Blue, said that “(d)emand for second homes was up 70% from pre-pandemic levels in October, outpacing August’s 48% gain but below January’s record 91% growth.”

Here is a chart from that report.

Note that this “demand index” is based on mortgage rate-lock data. Since the share of second home purchases that are cash-financed is typically fairly high, the index may not fully reflect trends in second home purchases.

I’ll have more on these topics later. However these data suggest that the astonishingly strong rebound in the housing market following the onset of the pandemic is not solely due to, and perhaps not much related to, “demographics.”

American Home 4 Rent (ticker AMH) Strategic Strategy: Grow, Grow, Grow (from a November Investor Presentation)

American Homes 4 Rent, one of the largest publicly-traded companies in the single-family rental market that has embarked on an aggressive “build-to-rent” program, included the following data in its November “Investor Highlights” report.

	2018	2019	2020	2021(3)
Total	2,351	1,379	2,592	4,650
National Builders	408	148	381	350
Traditional Acquisitions	1,552	286	564	2,250
AMH Development	391	945	1,647	2,050

AMH Land Development Pipeline (Lots Owned or Controlled)
2016	217
2017	2,046
2018	4,203
2019	6,377
2020	8,954
2021(e)	16,000

by Calculated Risk on 11/18/2021 12:08:00 PM

Today, in the Real Estate Newsletter: Housing Predictions: Guesses and the Data

Excerpt:

Currently my view is house prices seem too high, but lending has been reasonably solid, and there are some fundamental reasons for the high house prices (See: The Housing Conundrum)

If inventory stays low, then house prices will continue to rise fairly quickly (although it appears house price growth is slowing). Double digit house price increases aren’t sustainable, so the question I’m asking now is: What will cause inventories to increase?

I’m considering three possibilities: 1) mortgage rates rise fairly quickly, slowing demand, 2) economic problems in China spillover into the US, and 3) unregulated areas of finance cause economic problems.
...
This is something I mentioned on my blog in 2013:

Each new generation of Wall Street wizards figures out a new way to turn lead into gold, and to become wealthy while damaging the financial system.   Some of these wizards are probably perfecting their financial alchemy right now.

...
The most likely cause of higher home inventories will be higher mortgage rates, but unregulated areas of finance are always a concern and something I’ll be watching.

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by Calculated Risk on 11/18/2021 10:54:00 AM

Note: Since occupancy declined sharply at the onset of the pandemic, CoStar is comparing to 2019.

From CoStar: STR: US Weekly Hotel Rate Maintains Growth Over 2019

U.S. hotel performance increased slightly from the previous week, according to STR‘s latest data through November 13.

November 7-13, 2021 (percentage change from comparable week in 2019*):

• Occupancy: 61.6% (-3.9%)
• Average daily rate (ADR): $129.98 (+2.6%)
• Revenue per available room (RevPAR): $80.02 (-1.4%)

*Due to the steep, pandemic-driven performance declines of 2020, STR is measuring recovery against comparable time periods from 2019.
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, dashed purple is 2019, and dashed light blue is for 2009 (the worst year on record for hotels prior to 2020).

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

The occupancy rate will now decline seasonally into the new year.

by Calculated Risk on 11/18/2021 08:34:00 AM

The DOL reported:

In the week ending November 13, the advance figure for seasonally adjusted initial claims was 268,000, a decrease of 1,000 from the previous week's revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000. The previous week's level was revised up by 2,000 from 267,000 to 269,000. The 4-week moving average was 272,750, a decrease of 5,750 from the previous week's revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week's average was revised up by 500 from 278,000 to 278,500.
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 272,750.

The previous week was revised up.

Regular state continued claims decreased to 2,080,000 (SA) from 2,209,000 (SA) the previous week.

Weekly claims were above consensus forecast.

by Calculated Risk on 11/17/2021 08:21:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 260 thousand initial claims, down from 267 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for November. The consensus is for a reading of 24.0, up from 23.8.

• At 11:00 AM, the Kansas City Fed manufacturing survey for November.