by Calculated Risk on 5/03/2022 12:45:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Rent Increases Up Sharply Year-over-year, Pace may be slowing

A brief excerpt:

Here is a graph of the year-over-year (YoY) change for these measures since January 2015. All of these measures are through March 2022 (Apartment List through April 2022).

Note that new lease measures (Zillow, Apartment List) dipped early in the pandemic, whereas the BLS measures were steady. Then new leases took off, and the BLS measures are picking up.
...
The Zillow measure is up 16.8% YoY in February, down from 17.2% YoY in February. And the ApartmentList measure is up 16.4% as of April, down from 17.2% in March. Both the Zillow measure (a repeat rent index), and ApartmentList are showing a sharp increase in rents.

Clearly rents are still increasing, and we should expect this to continue to spill over into measures of inflation in 2022. The Owners’ Equivalent Rent (OER) was up 4.5% YoY in March, from 4.3% YoY in February - and will likely increase further in the coming months.

My suspicion - based on all of the above data - is rent increases will slow over the coming months.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 5/03/2022 10:05:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings was at a series high of 11.5 million on the last business day of March, although little changed over the month, the U.S. Bureau of Labor Statistics reported today. Hires, at 6.7 million, were also little changed while total separations edged up to 6.3 million. Within separations, quits edged up to a series high of 4.5 million, while layoffs and discharges were little changed at 1.4 million.
emphasis added

The following graph shows job openings (yellow line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for March, the employment report this Friday will be for April.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

The spike in layoffs and discharges in March 2020 are labeled, but off the chart to better show the usual data.

Jobs openings increased slightly in March to 11.549 million from 11.344 million in February.

The number of job openings (yellow) were up 36% year-over-year. 

Quits were up 23% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 5/03/2022 08:00:00 AM

Notes: This CoreLogic House Price Index report is for March. The recent Case-Shiller index release was for February. The CoreLogic HPI is a three-month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: U.S. Annual Home Price Growth Exceeds 20% in March, CoreLogic Reports

CoreLogic® ... today released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for March 2022.

U.S. home prices continued to post significant year-over-year gains in March, up by 20.9%, another record high. Even with the past year’s streak of double-digit price increases, annual gains are projected to slow to around 6% by next March, due in part to rising mortgage rates and higher home prices hampering affordability for some home shoppers. Buyers who closed on a property in March had a good chance of locking in mortgage rates around 4% or slightly lower. By late April, rates had moved up to more than 5%, a jump of about 30% from the same time last year and a trend that might derail more prospective buyers.

“The annual growth in the U.S. index was the largest we have measured in the 45-year history of the CoreLogic Home Price Index,” said Dr. Frank Nothaft, chief economist at CoreLogic. “Couple that price increase with the rapid rise in mortgage rates and buyer affordability has fallen sharply. In April, 30-year fixed mortgage rates averaged nearly 2 percentage points higher than one year earlier. With the growth in home prices, that means the monthly principal and interest payment to buy the median-priced home was up about 50% in April compared with last April.”
...
Nationally, home prices increased 20.9% in March 2022, compared to March 2021. On a month-over-month basis, home prices increased by 3.3% compared to February 2022.
...
Annual home price gains are forecast to slow to 5.9% by March 2023.
emphasis added

by Calculated Risk on 5/02/2022 08:46:00 PM

From Matthew Graham at Mortgage News Daily: 30yr Fixed Mortgage Rates Now Over 5.5%

The hits keep coming for mortgage rates in 2022. Not since the early 80s have rates risen as quickly as they have in the past 2 months (or the past 4 months for that matter). Less than 6 months ago, some lenders were still quoting top tier conforming 30yr fixed rates just under 3%. As recently as early March, those same rates were still in the high 3's at times. Now today, the average lender is easily over 5.5%. [30 year fixed 5.55%]
emphasis added

Tuesday:
• At 8:00 AM ET, Corelogic House Price index for March.

• At 10:00 AM, Job Openings and Labor Turnover Survey for March from the BLS.

• All day, Light vehicle sales for April. The expectation is for light vehicle sales to be 13.8 million SAAR in April, up from 13.36 million in March (Seasonally Adjusted Annual Rate).

On COVID (focus on hospitalizations and deaths):

COVID Metrics
	Now	Week Ago	Goal
Percent fully Vaccinated	66.2%	---	≥70.0%1
Fully Vaccinated (millions)	219.7	---	≥2321
New Cases per Day3🚩	57,020	45,428	≤5,0002
Hospitalized3🚩	10,591	10,366	≤3,0002
Deaths per Day3	307	346	≤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.

Click on graph for larger image.

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

Deaths are declining week-over-week, but new cases have more than doubled from the recent low, and hospitalizations are increasing.

Average daily deaths bottomed in July 2021 at 214 per day.

by Calculated Risk on 5/02/2022 04:08:00 PM

Here is another monthly update on framing lumber prices.  

This graph shows CME random length framing futures through May 2nd.

Lumber was at $1,035 per 1000 board feet this morning.  

This is down from the peak of $1,733, and down from $1,670 a year ago - but up sharply from $361 two years ago.

Click on graph for larger image.

There is somewhat of a seasonal demand for lumber, and lumber prices usually peak in April or May (although it seems likely lumber prices peaked earlier this year).

A combination of strong demand and various supply constraints have kept lumber prices high and volatile.

by Calculated Risk on 5/02/2022 11:37:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Black Knight Mortgage Monitor for March: "Home Affordability Nears All-Time Low"

A brief excerpt:

Note: Black Knights data on affordability goes back to 1996. This doesn’t include housing in the 1980 period when 30-year mortgage rates peaked at over 18%.

And on the payment to income ratio:

• The least affordable American housing has ever been was back in July 2006, when it took 34.1% of median income to make the monthly P&I payment on the average-priced home bought with 20% down

• As of April 21, that payment-to-income ratio has now climbed all the way to 32.5%, within just 1.6 points of the prior record

• A rise of just 50 more basis points (BPS) in rates or a 5% rise in home prices, would push affordability to its worst level on record, and they are already up 200 BPS and 5.9% respectively since the start of 2022

• 37 markets – representing nearly a third of the country – are now the least affordable they’ve ever been

As Black Knight has noted, there were “affordability products” with low teaser rates available during the housing bubble. Excluding the bubble years, this is the worst affordability since at least the early ‘90s, maybe '80s.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 5/02/2022 10:20:00 AM

From the Census Bureau reported that overall construction spending increased 1.3%:

Construction spending during March 2022 was estimated at a seasonally adjusted annual rate of $1,730.5 billion, 0.1 percent above the revised February estimate of $1,728.6 billion. The March figure is 11.7 percent above the March 2021 estimate of $1,548.6 billion.
emphasis added

Private spending increased and public spending decreased:

Spending on private construction was at a seasonally adjusted annual rate of $1,379.7 billion, 0.2 percent above the revised February estimate of $1,376.9 billion. ...

In March, the estimated seasonally adjusted annual rate of public construction spending was $350.8 billion, 0.2 percent below the revised February estimate of $351.7 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.

Residential (red) spending is 30% above the bubble peak (in nominal terms - not adjusted for inflation).

Non-residential (blue) spending is 20% above the bubble era peak in January 2008 (nominal dollars).

Public construction spending is 8% above the peak in March 2009.

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

On a year-over-year basis, private residential construction spending is up 18.4%. Non-residential spending is up 8.5% year-over-year. Public spending is up 1.7% year-over-year.

This was below consensus expectations of a 0.7% increase in spending; however, construction spending for the previous two months was revised up.

by Calculated Risk on 5/02/2022 10:05:00 AM

(Posted with permission). The ISM manufacturing index indicated expansion. The PMI® was at 55.4% in April, down from 57.1% in March. The employment index was at 50.9%, down from 56.3% last month, and the new orders index was at 53.5%, down from 53.8%.

From ISM: Manufacturing PMI® at 55.4% April 2022 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector grew in April, with the overall economy achieving a 23rd consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The April Manufacturing PMI® registered 55.4 percent, a decrease of 1.7 percentage points from the March reading of 57.1 percent. This figure indicates expansion in the overall economy for the 23rd month in a row after a contraction in April and May 2020. This is the lowest reading since July 2020 (53.9 percent). The New Orders Index registered 53.5 percent, down 0.3 percentage point compared to the March reading of 53.8 percent. The Production Index reading of 53.6 percent is a 0.9-percentage point decrease compared to March’s figure of 54.5 percent. The Prices Index registered 84.6 percent, down 2.5 percentage points compared to the March figure of 87.1 percent. The Backlog of Orders Index registered 56 percent, 4 percentage points lower than the March reading of 60 percent. The Employment Index figure of 50.9 percent is 5.4 percentage points lower than the 56.3 percent recorded in March. The Supplier Deliveries Index registered 67.2 percent, an increase of 1.8 percentage points compared to the March figure of 65.4 percent. The Inventories Index registered 51.6 percent, 3.9 percentage points lower than the March reading of 55.5 percent. The New Export Orders Index reading of 52.7 percent is down 0.5 percentage point compared to March’s figure of 53.2 percent. The Imports Index registered 51.4 percent, a 0.4-percentage point decrease from the March reading of 51.8 percent.”
emphasis added

This suggests manufacturing expanded at a slower pace in April than in March.  This was below the consensus forecast, and the employment index was weak in April.

by Calculated Risk on 5/02/2022 08:41:00 AM

Tracking existing home inventory is very important in 2022.

Inventory usually declines in the winter, and then increases in the spring. Inventory bottomed seasonally at the beginning of March 2022 and is now up 21.2% since then.

Click on graph for larger image in graph gallery.

This inventory graph is courtesy of Altos Research.

As of April 29th, inventory was at 292 thousand (7-day average), compared to 275 thousand the prior week. Inventory was up 6.2% from the previous week.

Last year inventory bottomed seasonally in April 2021 - very late in the year. This year, by this measure, inventory bottomed seasonally at the beginning of March.

Inventory is still very low. Compared to the same week in 2021, inventory is down 4.9% from 307 thousand, but compared to the same week in 2020, and inventory is down 60.4% from 738 thousand.

Here are the inventory milestones I’m watching for with the Altos data:

1. The seasonal bottom (already happened on March 4th for Altos)✅

2. Inventory up year-over-year (likely very soon)

3. Inventory up compared to two years ago (currently down 60% according to Altos)

4. Inventory back to 1999 levels (currently down 67%).

For the second milestone, here is a table of the year-over-year change by week since the beginning of the year.

Week Ending	YoY Change
12/31/2021	-30.0%
1/7/2022	-26.0%
1/14/2022	-28.6%
1/21/2022	-27.1%
1/28/2022	-25.9%
2/4/2022	-27.9%
2/11/2022	-27.5%
2/18/2022	-25.8%
2/25/2022	-24.9%
3/4/2022	-24.2%
3/11/2022	-21.7%
3/18/2022	-21.7%
3/25/2022	-19.0%
4/1/2022	-17.6%
4/8/2022	-14.8%
4/15/2022	-13.1%
4/22/2022	-11.2%
4/29/2022	-4.9%

Here is a graph of the year-over-year change in the Altos data.

The blue trend line is from the beginning of the year, and the red trend line is over the last 8 weeks.

Currently it appears inventory will be up year-over-year soon.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 5/02/2022 08:07:00 AM

These indicators are mostly for travel and entertainment.    It is interesting to watch these sectors recover as the pandemic subsides.  Note: Apple has discontinued "Apple mobility", and restaurant traffic is mostly back to normal.

----- Airlines: Transportation Security Administration -----
The TSA is providing daily travel numbers.

This data is as of May 1st.

Click on graph for larger image.

This data shows the 7-day average of daily total traveler throughput from the TSA for 2019 (Light Blue), 2020 (Black), 2021 (Blue) and 2022 (Red).

The dashed line is the percent of 2019 for the seven-day average.

The 7-day average is down 9.7% from the same day in 2019 90.3% of 2019).  (Dashed line) 

Air travel has been moving sideways over the last month, off about 10% from 2019.

----- Movie Tickets: Box Office Mojo -----
This data shows domestic box office for each week and the median for the years 2016 through 2019 (dashed light blue).  

Black is 2020, Blue is 2021 and Red is 2022.  

The data is from BoxOfficeMojo through April 28th.

Note that the data is usually noisy week-to-week and depends on when blockbusters are released.  

Movie ticket sales were at $121 million last week, down about 23% from the median for the week. 

----- Hotel Occupancy: STR -----
This graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

The red line is for 2022, black is 2020, blue is the median, and dashed light blue is for 2021.

This data is through April 23rd. The occupancy rate was down 4.2% compared to the same week in 2019.

The 4-week average of the occupancy rate is at the median rate for the previous 20 years (Blue).

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

The 4-week average of the occupancy rate will now mostly move sideways seasonally until the summer.

----- New York City Subway Usage -----
Here is some interesting data on New York subway usage (HT BR).

This graph is from Todd W Schneider. 

This graph shows how much MTA traffic has recovered in each borough (Graph starts at first week in January 2020 and 100 = 2019 average).

Manhattan is at about 38% of normal.

This data is through Friday, April 29th.

He notes: "Data updates weekly from the MTA’s public turnstile data, usually on Saturday mornings".