RSS Feed by Calculated Risk on 7/18/2022 01:21:00 PM
Monday, July 18, 2022
3rd Look at Local Housing Markets in June, Sales Down Sharply, Inventory "Surged"
Today, in the Calculated Risk Real Estate Newsletter: 3rd Look at Local Housing Markets in June, Sales Down Sharply, Inventory "Surged"
A brief excerpt:
California doesn’t report monthly inventory numbers, but they do report the year-over-year change. Here is the press release from the California Association of Realtors® (C.A.R.): California home sales and price curb in June as housing demand cools, C.A.R. reportsThere is much more in the article. You can subscribe at https://calculatedrisk.substack.com/Closed escrow sales of existing, single-family detached homes in California totaled a seasonally adjusted annualized rate of 344,970 in June, according to information collected by C.A.R. from more than 90 local REALTOR® associations and MLSs statewide. The statewide annualized sales figure represents what would be the total number of homes sold during 2022 if sales maintained the June pace throughout the year. It is adjusted to account for seasonal factors that typically influence home sales. June’s sales pace was down 8.4 percent on a monthly basis from 376,560 in May and down 20.9 percent from a year ago, when 436,020 homes were sold on an annualized basis.
California’s median home price declined 4.0 percent in June to $863,790 from the revised record-high of $900,170 recorded in May. The June price was 5.4 percent higher than the $819,630 recorded last June. The moderation in the median home price was due partly to a change in the mix of sales in June, as the high-end market started pulling back.
With both closed sales and pending sales slowing by more than 20 percent, total active listings surged 64.4 percent in June, the largest year-over-year growth in more than seven years. Active listings in June also climbed to the highest level since November 2019, with a month-to-month increase of 28.8 percent from May.... Housing economist Tom Lawler expects the NAR to report sales at a seasonally adjusted annual rate of 5.12 million in June. The consensus is for 5.40 million.
Contracts for sales in June were mostly signed in April and May, when mortgage rates were lower than in June, so we will probably see further declines in sales in July and August
NAHB: Builder Confidence "Plunges" to 55 in July
by Calculated Risk on 7/18/2022 10:07:00 AM
The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 55, down from 67 in June. Any number above 50 indicates that more builders view sales conditions as good than poor.
From the NAHB: Builder Confidence Plunges as Affordability Woes Mount
Builder confidence plunged in July as high inflation and increased interest rates stalled the housing market by dramatically slowing sales and buyer traffic. In a further sign of a weakening housing market, builder confidence in the market for newly built single-family homes posted its seventh straight monthly decline in July, falling 12 points to 55, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This marks the lowest HMI reading since May 2020 and the largest single-month drop in the history of the HMI, except for the 42-point drop in April 2020.
“Production bottlenecks, rising home building costs and high inflation are causing many builders to halt construction because the cost of land, construction and financing exceeds the market value of the home,” said NAHB Chairman Jerry Konter, a home builder and developer from Savannah, Ga. “In another sign of a softening market, 13% of builders in the HMI survey reported reducing home prices in the past month to bolster sales and/or limit cancellations.”
“Affordability is the greatest challenge facing the housing market,” said NAHB Chief Economist Robert Dietz. “Significant segments of the home buying population are priced out of the market. Policymakers must address supply-side issues to help builders produce more affordable housing.”
...
All three HMI components posted declines in July: Current sales conditions dropped 12 points to 64, sales expectations in the next six months declined 11 points to 50 and traffic of prospective buyers fell 11 points to 37.
Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 65, the Midwest dropped four points to 52, the South fell eight points to 70 and the West posted a 12-point decline to 62.
emphasis added
Click on graph for larger image.This graph shows the NAHB index since Jan 1985.
This was well below the consensus forecast, but still above 50.
The "traffic of prospective buyers" is now well below breakeven at 37 (below 50).
Housing Inventory July 18th Update: Up 30% Year-over-year
by Calculated Risk on 7/18/2022 08:54:00 AM
Inventory is increasing rapidly. Inventory bottomed seasonally at the beginning of March 2022 and is now up 110% since then. More than double!
Altos reports inventory is up 30.3% year-over-year and is now 16.3% above the peak last year.
Click on graph for larger image.
This inventory graph is courtesy of Altos Research.
Click on graph for larger image.This inventory graph is courtesy of Altos Research.
As of July 15th, inventory was at 509 thousand (7-day average), compared to 490 thousand the prior week.
Inventory was up 3.8% from the previous week. Inventory is increasing much faster than normal for this time of year (both in percentage terms and in total inventory added).
Inventory is still historically low. Compared to the same week in 2021, inventory is up 30.3% from 391 thousand, however compared to the same week in 2020 inventory is down 21.4% from 647 thousand. Compared to 3 years ago, inventory is down 47.6% from 970 thousand.
Here are the inventory milestones I’m watching for with the Altos data:
1. The seasonal bottom (happened on March 4th for Altos) ✅
2. Inventory up year-over-year (happened on May 13th for Altos) ✅
3. Inventory up compared to two years ago (currently down 21.4% according to Altos)
4. Inventory up compared to 2019 (currently down 47.6%).
1. The seasonal bottom (happened on March 4th for Altos) ✅
2. Inventory up year-over-year (happened on May 13th for Altos) ✅
3. Inventory up compared to two years ago (currently down 21.4% according to Altos)
4. Inventory up compared to 2019 (currently down 47.6%).
Here is a graph of the inventory change vs 2021, 2020 (milestone 3 above) and 2019 (milestone 4).
The blue line is the year-over-year data, the red line is compared to two years ago, and dashed purple is compared to 2019.
Two years ago (in 2020) inventory was declining all year, so the two-year comparison will get easier all year.
Based on the recent increases in inventory, my current estimate is inventory will be up compared to 2020 in late August of this year (next month), and back to 2019 levels at the beginning of 2023.
Mike Simonsen discusses this data regularly on Youtube.
Five High Frequency Indicators for the Economy
by Calculated Risk on 7/18/2022 08:31:00 AM
These indicators are mostly for travel and entertainment. It is interesting to watch these sectors recover as the pandemic subsides. Notes: I've added back gasoline supplied to see if there is an impact from higher gasoline prices. Apple has discontinued "Apple mobility", and restaurant traffic is mostly back to normal.
The TSA is providing daily travel numbers.
This data is as of July 17th.
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 12.3% from the same day in 2019 (87.7% of 2019). (Dashed line)
Air travel - as a percent of 2019 - has been moving sideways over the last several months, off about 10% from 2019 - with some ups and downs, usually related to timing of holidays.
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 July 14th.
Note that the data is usually noisy week-to-week and depends on when blockbusters are released.
Movie ticket sales were at $334 million last week, up about 14% from the median for the week.
Note that the data is usually noisy week-to-week and depends on when blockbusters are released.
Movie ticket sales were at $334 million last week, up about 14% from the median for the week.
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. Dashed purple is 2019 (STR is comparing to a strong year for hotels).
This data is through July 9th. The occupancy rate was down 14.5% 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.
Notes: Y-axis doesn't start at zero to better show the seasonal change.
This graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows gasoline supplied compared to the same week of 2019.
Blue is for 2020. Purple is for 2021, and Red is for 2022.
As of July 8th, gasoline supplied was down 17.3% compared to the same week in 2019.
Recently gasoline supplied has been running somewhat below 2019 levels.
Here is some interesting data on New York subway usage (HT BR).
This graph is from Todd W Schneider. This graph shows weekly turnstile entries since 2015.
Currently traffic is less than half of normal.
Currently traffic is less than half of normal.
This data is through Friday, July 15th.
He notes: "Data updates weekly from the MTA’s public turnstile data, usually on Saturday mornings".
Sunday, July 17, 2022
Monday: Homebuilder Survey
by Calculated Risk on 7/17/2022 08:15:00 PM
Weekend:
• Schedule for Week of July 17, 2022
Monday:
• At 10:00 AM ET, The July NAHB homebuilder survey. The consensus is for a reading of 66, down from 67. Any number above 50 indicates that more builders view sales conditions as good than poor.
From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 9 and DOW futures are up 50 (fair value).
Oil prices were down over the last week with WTI futures at $97.26 per barrel and Brent at $100.85 per barrel. A year ago, WTI was at $72, and Brent was at $74 - so WTI oil prices are up 35% year-over-year.
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $4.50 per gallon. A year ago, prices were at $3.15 per gallon, so gasoline prices are up $1.35 per gallon year-over-year.
Record Single Family Investor Buying in Q1, Possible evidence of Slowdown in Q2
by Calculated Risk on 7/17/2022 09:58:00 AM
Today, in the Calculated Risk Real Estate Newsletter: Record Single Family Investor Buying in Q1, Possible evidence of Slowdown in Q2
A brief excerpt:
Housing economist Tom Lawler discusses the CoreLogic data: CoreLogic: Share of SF Homes Purchased by Investors Hit Record High in Q1/2022; Non-Investor Home Purchases Down Significantly YOYThere is much more in the article. You can subscribe at https://calculatedrisk.substack.com/
In its quarterly report on “investor” home buying activity, CoreLogic reported that SF homes purchased by “investors – defined as entities (individual or corporate) who retained at least three properties simultaneously within the last 10 years – increased to a record high of 27.6% in the first quarter of 2022, up from 24.8% in the fourth quarter of 2021 and 19.2% from the first quarter of 2021.
...
CR Notes: Investors pulling back could be a factor in less housing demand. Housing analyst Ivy Zelman said last week about non-primary buyers (edited slightly for clarity):
And we think about non-primary for those that you know, might not appreciate what that includes: second home buyers, private investors, institutional investors and the institutional investors could also incorporate what we call the intermediaries. Liquidity providers; iBuyers. So, there's been tremendous speculation and aggregate that number or the latest sort of first Q - we don't have two Q yet - aggregated to about 24% of transactions, and we think that's even understating it …
...
[We are seeing less] demand and seasonally worse than normal activity and increasing [cancellations] … And I do think the non-primary is a big factor.
Saturday, July 16, 2022
Real Estate Newsletter Articles this Week
by Calculated Risk on 7/16/2022 02:11:00 PM
At the Calculated Risk Real Estate Newsletter this week:
• Early Read on Existing Home Sales in June
• Current State of the Housing Market
• Lawler on Demographics: Observations and Updated Population Projections
• 2nd Look at Local Housing Markets in June
• Homebuilder Comments in June: “Someone turned out the lights on our sales in June!
• Apartment Vacancy Rate Declined in Q2
This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.
You can subscribe at https://calculatedrisk.substack.com/
Most content is available for free (and no Ads), but please subscribe!
Schedule for Week of July 17, 2022
by Calculated Risk on 7/16/2022 08:11:00 AM
The key reports this week are June Housing Starts and Existing Home Sales.
10:00 AM: The July NAHB homebuilder survey. The consensus is for a reading of 66, down from 67. Any number above 50 indicates that more builders view sales conditions as good than poor.
8:30 AM ET: Housing Starts for June. This graph shows single and total housing starts since 1968.
The consensus is for 1.586 million SAAR, up from 1.549 million SAAR in May.
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
10:00 AM: Existing Home Sales for June from the National Association of Realtors (NAR). The consensus is for 5.40 million SAAR, down from 5.41 million last month.The graph shows existing home sales from 1994 through the report last month.
Housing economist Tom Lawler expects the NAR to report sales of 5.12 million SAAR for June.
During the day: The AIA's Architecture Billings Index for June (a leading indicator for commercial real estate).
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 235 thousand down from 244 thousand last week.
8:30 AM: the Philly Fed manufacturing survey for July. The consensus is for a reading of 5.5, up from -3.1.
10:00 AM: State Employment and Unemployment (Monthly) for June 2022
Friday, July 15, 2022
COVID July 15, 2022, Update on Cases, Hospitalizations and Deaths
by Calculated Risk on 7/15/2022 09:48:00 PM
On COVID (focus on hospitalizations and deaths):
Hospitalizations have almost quadrupled from the lows in April 2022.
Click on graph for larger image.
This graph shows the daily (columns) and 7-day average (line) of deaths reported.
| COVID Metrics | ||||
|---|---|---|---|---|
| Now | Week Ago | Goal | ||
| New Cases per Day2🚩 | 126,023 | 107,572 | ≤5,0001 | |
| Hospitalized2🚩 | 32,824 | 29,574 | ≤3,0001 | |
| Deaths per Day2🚩 | 348 | 320 | ≤501 | |
| 1my goals to stop daily posts, 27-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.
Average daily deaths bottomed in July 2021 at 214 per day.
Early Read on Existing Home Sales in June
by Calculated Risk on 7/15/2022 03:42:00 PM
Today, in the Calculated Risk Real Estate Newsletter: Early Read on Existing Home Sales in June
A brief excerpt:
From housing economist Tom Lawler:There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/
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 5.12 million in June, down 5.4% from May’s preliminary pace and down 14.2% from last June’s seasonally adjusted pace.
...
CR Notes:
With a new holiday this year in June, Juneteenth, it is possible the seasonal adjustment will be off a little. However, the local markets I track suggest a significant year-over-year decline in NSA sales for June.
The National Association of Realtors® (NAR) is schedule to release June existing home sales on Wednesday, July 20th at 10:00 AM ET. The consensus is for 5.40 million SAAR, down from 5.41 million last month. Based on Tom Lawler’s estimate, we should expect a large negative surprise.
