by Calculated Risk on 9/10/2023 08:21:00 AM

From STR: U.S. hotel results for week ending 2 September

Following seasonal patterns, U.S. hotel performance showed mixed results from the previous week but positive comparisons year over year, according to CoStar’s latest data through 2 September. ...

27 August through 2 September 2023 (percentage change from comparable week in 2022):

• Occupancy: 62.7% (+0.2%)
• Average daily rate (ADR): US$150.52 (+1.8%)
• Revenue per available room (RevPAR): US$94.38 (+2.0%)
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 2023, black is 2020, blue is the median, and dashed light blue is for 2022.  Dashed purple is for 2018, the record year for hotel occupancy. 

The 4-week average of the occupancy rate is tracking last year, and close to the median rate for the period 2000 through 2022 (Blue).

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

The 4-week average of the occupancy rate has peaked for the year and will pick up a little soon due to Fall business travel.

by Calculated Risk on 9/09/2023 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• Lawler: Single Family Rent Trends at AMH and Invitation Homes

• 1st Look at Local Housing Markets in August

• The "Home ATM" Stays Mostly Closed in Q2

• Black Knight Mortgage Monitor: Purchase Rate Locks "are now running 39% below pre-pandemic levels"

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/

by Calculated Risk on 9/09/2023 08:11:00 AM

The key economic reports this week are August Consumer Price Index (CPI) and Retail Sales.

For manufacturing, August Industrial Production, and the September New York Fed survey, will be released this week.

----- Monday, September 11th -----
No major economic releases scheduled.

----- Tuesday, September 12th -----
6:00 AM: NFIB Small Business Optimism Index for August.

8:00 AM: Corelogic House Price index for July

----- Wednesday, September 13th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: The Consumer Price Index for August from the BLS. The consensus is for a 0.6% increase in CPI, and a 0.2% increase in core CPI.  The consensus is for CPI to be up 3.6% year-over-year and core CPI to be up 4.3% YoY.

----- Thursday, September 14th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 212 thousand initial claims, down from 216 thousand last week.

8:30 AM ET: Retail sales for August will be released.  The consensus is for a 0.1% increase in retail sales.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

8:30 AM: The Producer Price Index for August from the BLS. The consensus is for a 0.4% decrease in PPI, and a 0.2% increase in core PPI.

----- Friday, September 15th -----
8:30 AM ET: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of -10.7, up from -19.0.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for August.

This graph shows industrial production since 1967.

The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to be unchanged at 79.3%.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for September).

by Calculated Risk on 9/08/2023 08:19:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Due to changes at the CDC, weekly cases are no longer updated.

After the first few weeks, the pandemic low for weekly deaths had been the week of July 7, 2021, at 1,690 deaths (until recently).  

Recently hospitalizations have more than doubled from a low of 5,150 in June 2023.

COVID Metrics
	Now	Week Ago	Goal
Hospitalized2🚩	12,852	11,196	≤3,0001
Deaths per Week2🚩	722	672	≤3501
1my goals to stop weekly posts, 2Weekly for Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Hospitalized and Deaths ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

Weekly deaths have increased from a record low of 469 in early July.

For deaths, I'm currently using 3 weeks ago for "now", since the most recent two weeks will be revised significantly.

by Calculated Risk on 9/08/2023 04:11:00 PM

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

U.S. railroads originated 1.13 million total carloads in August 2023, down 2.0% from August 2022 and their third straight year-over-year decline. Total carloads averaged 226,675 per week in August 2023, very close to the weekly averages in March through June 2023.

U.S. intermodal originations were down 6.3% in August 2023 from August 2022, their 24th year-over-year decline in the past 25 months. However, originations averaged 247,858 units per week in August 2023, the most in 10 months. Intermodal remains subpar for a number of reasons, including a continuing shift in consumer spending away from goods to services; a related sharp downturn in port activity; and tougher price competition from trucks.
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 2021, 2022 and 2022:

U.S. railroads (not including the U.S. subsidiaries of Canadian and Mexican railroads) originated 1.13 million total carloads in August 2023, down 2.0% (23,323 carloads) from August 2022 and their third straight yearover-year decline. Carloads averaged 226,675 per week in August 2023, very close to the weekly averages in March through June 2023. (July was lower because of the July 4 holiday.)

The second graph shows the six-week average (not monthly) of U.S. intermodal in 2021, 2022 and 2023: (using intermodal or shipping containers):

A number of factors help explain why U.S. intermodal volumes are down. Here are three. First, U.S. consumer spending is shifting back toward services. Goods as a share of total spending fell from a pandemic era peak of 35.8% in March 2021 to 33.2% in July 2023. Second, port activity is down sharply. Total combined loaded imports and exports at major Western U.S. ports were 20.6% lower (in terms of TEUs) in 2023 through July than in 2022 through July. For major Eastern U.S. ports, the decline was 10.6%. That’s important because imports and exports account for somewhere around half of U.S. intermodal volume. Third, truck competition is more intense today. Based on the producer price index for truckload shipments, average truck rates in July 2023 were 22% lower than in July 2022.

by Calculated Risk on 9/08/2023 01:45:00 PM

Today, in the Real Estate Newsletter: The "Home ATM" Stays Mostly Closed in Q2

Excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined. Note: Very few homeowners have negative equity now - unlike during the housing bubble.
...
Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q2 2023, mortgage debt increased $90 billion, up from $55 billion in Q1, and down from the cycle peak of $471 billion in Q2 2021. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

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

by Calculated Risk on 9/08/2023 12:26:00 PM

The Federal Reserve released the Q2 2023 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $154.3 trillion during the second quarter of 2023. The value of directly and indirectly held corporate equities increased $2.6 trillion and the value of real estate increased $2.5 trillion.
...
Household debt increased 2.7 percent at an annual rate in the second quarter of 2023. Consumer credit grew at an annual rate of 2.3 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 2.8 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  

Net worth increased $5.5 trillion in Q2 and is at an all-time high.  As a percent of GDP, net worth increased in Q2, but is below the peak in 2021.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

The second graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q2 2023, household percent equity (of household real estate) was at 71.1% - up from 70.0% in Q1, 2023. This is close to the highest percent equity since the 1960s.

Note: This includes households with no mortgage debt.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  Note this graph was impacted by the sharp decline in Q2 2020 GDP.

Mortgage debt increased by $90 billion in Q2.

Mortgage debt is up $2.15 trillion from the peak during the housing bubble, but, as a percent of GDP is at 47.9% - down from Q1 - and down from a peak of 73.3% of GDP during the housing bust.

The value of real estate, as a percent of GDP, increased in Q2 - but is below the peak in Q2 2022 - and is well above the average of the last 30 years.

by Calculated Risk on 9/08/2023 10:59:00 AM

From BofA:

Overall, the data flow since our last report pushed our 3Q US GDP tracking up four-tenths to 3.1% q/q saar and 2Q up two-tenths to 2.5%. Next week, August CPI, retail sales, PPI, import and export prices, industrial production and monthly budget statement will affect our GDP tracking [Sept 8th estimate]
emphasis added

From Goldman:

July goods exports were stronger than our previous assumption, and we boosted our Q3 GDP tracking estimate by 0.2pp to +3.1% (qoq ar). We left our Q3 domestic final sales growth forecast unchanged at +2.8%. [Sept 6th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 5.6 percent on September 6, unchanged from September 1 after rounding. After recent releases from the US Census Bureau, the US Bureau of Economic Analysis, and the Institute for Supply Management, decreases in the nowcasts of third-quarter real personal consumption expenditures growth and third-quarter real gross private domestic investment growth were offset by an increase in the nowcast of third-quarter real net exports. [Sept 6th estimate]

by Calculated Risk on 9/08/2023 09:10:00 AM

From Manheim Consulting today: Wholesale Used-Vehicle Prices See Minimal Increase in August

Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) increased 0.2% in August from July. The Manheim Used Vehicle Value Index (MUVVI) rose to 212.2, down 7.7% from a year ago.

“August brought a stop to wholesale price declines, though it was only a small reversal of the larger magnitude declines so far this spring and early summer,” said Chris Frey, senior manager of Economic and Industry Insights for Cox Automotive. “Historically speaking, the monthly figure aligns with the 0.3% average we’ve seen since 1997. Sure, there were swings in August during the financial crisis, the COVID reopening period of 2020, and the 2022 doldrums; but this year, the performance looks more ordinary. Like last month’s note, the current Manheim Index level of 212.2 is barely above that of the 212.1 measure seen in August 2021. Used market conditions have been quite consistent for a few months and are not likely to change much, even with the larger push toward balance; sales are slightly stronger than expected, inventory remains tight, and prices are holding at levels around 6% below last year at the same time. These factors are expected to prevent any substantial decline in wholesale prices through year-end.”

The seasonal adjustment minimized August’s increase. The non-adjusted price change in August increased by 0.9% compared to July, moving the unadjusted average price down 7.5% year over year.
emphasis added

Click on graph for larger image.

This index from Manheim Consulting is based on all completed sales transactions at Manheim’s U.S. auctions.

The Manheim index suggests used car prices increased slightly in August (seasonally adjusted) and were down 7.7% year-over-year (YoY).

by Calculated Risk on 9/08/2023 08:11:00 AM

From CoreLogic: CoreLogic: Home Equity Increases From Winter to Spring, Reducing Underwater Properties in Q2

CoreLogic® ... today released the Homeowner Equity Report (HER) for the second quarter of 2023. The report shows that U.S. homeowners with mortgages (which account for roughly 63% of all properties) saw home equity decrease by 1.7% year over year, representing a collective loss of $287.6 billion, and an average loss of $8,300 per borrower since the second quarter of 2022.

However, U.S. homeowners with mortgages gained on average $13,900 quarter over quarter, amounting to a collective increase of $806 billion – or a 5.2% gain – in home equity. And while borrowers in the West continued to experience the largest year-over-year equity losses, homeowners in states like Hawaii, California and Washington still have the most accumulated equity due to the pace of appreciation over the past decade.

“While U.S. home equity is now lower than its peak in the second quarter of 2022, owners are in a better position than they were six months ago, when prices bottomed out,” said Selma Hepp, chief economist for CoreLogic. “The 5% overall increase in home prices since February means that the average U.S. homeowner has gained almost $14,000 compared with the previous quarter, a significant improvement for borrowers who bought when prices peaked in the spring of 2022.”

“Also, while more borrowers are underwater compared with one year ago,” Hepp continued, “they are not necessarily concentrated in markets that have seen the largest price declines, as negative equity also depends on the down payment. Natural disasters and related risks also play a substantial role in home equity changes.”

Negative equity, also referred to as underwater or upside-down mortgages, applies to borrowers who owe more on their mortgages than their homes are currently worth. As of the second quarter of 2023, the quarterly and annual changes in negative equity were:

Click on graph for larger image.

• Quarterly change: From the first quarter of 2023 to the second quarter of 2023, the total number of mortgaged homes in negative equity decreased by 6%, to 1.11 million homes or 2% of all mortgaged properties.

• Annual change: From the second quarter of 2022 to the second quarter of 2023, the total number of homes in negative equity increased by 4% from 1.06 million homes or 1.9% of all mortgaged properties.
emphasis added

The above graph is from CoreLogic and compares Q2 2023 to Q1 2023 equity distribution by LTV. There are still a few properties with LTV over 125%.  But most homeowners have a significant amount of equity.  

This is a very different picture than at the start of the housing bust when many homeowners had little equity.

The second graph is from a 2011 CoreLogic report and shows a large number of homeowners with negative equity - even as house prices were nearing a bottom!

On a year-over-year basis, the number of homeowners with negative equity has increased from 1.06 million to 1.11 million.