by Calculated Risk on 1/16/2024 10:45:00 AM

From the MBA: Delinquency Rates for Commercial Properties Increased in Fourth-Quarter 2023

Delinquency rates for mortgages backed by commercial properties increased during the fourth quarter of 2023, according to the Mortgage Bankers Association's (MBA) latest commercial real estate finance (CREF) Loan Performance Survey.

"Ongoing challenges in commercial real estate markets pushed the delinquency rate on CRE-backed loans higher in the final three months of 2023," said Jamie Woodwell, MBA's Head of Commercial Real Estate Research. "Delinquency rates jumped to 6.5 percent of balances for loans backed by office properties and to 6.1 percent for lodging-backed loans. Delinquencies for loans backed by retail properties remain elevated from the onset of the pandemic but were unchanged during the quarter. Delinquency rates for multifamily and industrial property loans both increased marginally but remain much lower.”

Woodwell continued, “Long-term interest rates have come down from their highs of last year, which should provide some relief to some loans, but many properties and loans still face higher rates, uncertainty about property values and – for some properties – changes in fundamentals. Each loan and property faces a different set of circumstances, which will come into play as the market works through loans that mature this year.”
emphasis added

Click on graph for larger image.

Loans backed by office properties drove the increase.

• 6.5% of the balance of office property loan balances were 30 days or more days delinquent, up from 5.1% at the end of last quarter.

• 6.1% of the balance of lodging loans were delinquent, up from 4.9%.

• 5.0% of retail balances were delinquent, flat from the previous quarter.

• 1.2% of multifamily balances were delinquent, up from 0.9%.

• 0.9% of the balance of industrial property loans were delinquent, up from 0.6%.

by Calculated Risk on 1/16/2024 08:17:00 AM

Earlier the BEA released their estimate of light vehicle sales for December. The BEA estimates sales of 15.83 million SAAR in December 2023 (Seasonally Adjusted Annual Rate), up 3.3% from the November sales rate, and up 16.8% from December 2022. 

Click on graph for larger image.

The first graph shows annual sales since 1976.

Sales in 2020 were impacted by the pandemic, and then sales rebounded slightly in 2021.  However, sales in 2022 were impacted significantly by supply chain disruptions.

In 2023, the supply issues subsided, and sales increased even with much higher lending rates.

This suggests vehicle sales might increase further in 2024 as rates decline.

The second graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the December 2023 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new all-time high of 570 thousand SAAR in April 2019.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 450 thousand SAAR in December, down from 478 thousand in November.  

On annual basis, sales in 2023 were at 506 thousand, up 6.4% from 476 thousand in 2022.

Usually, heavy truck sales decline sharply prior to a recession.   Sales were decent in December.

by Calculated Risk on 1/15/2024 07:11:00 PM

Weekend:
• Schedule for Week of January 14, 2024

Tuesday:
• 8:30 AM ET, The New York Fed Empire State manufacturing survey for January. The consensus is for a reading of -7.1, up from -14.5.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 8 and DOW futures are down 57 (fair value).

Oil prices were down over the last week with WTI futures at $72.48 per barrel and Brent at $78.15 per barrel. A year ago, WTI was at $80, and Brent was at $83 - so WTI oil prices were down 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.05 per gallon. A year ago, prices were at $3.28 per gallon, so gasoline prices are down $0.23 year-over-year.

by Calculated Risk on 1/15/2024 11:03:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Update: The Housing Bubble and Mortgage Debt as a Percent of GDP

A brief excerpt:

A year ago, I wrote The Housing Bubble and Mortgage Debt as a Percent of GDP. Here is an update to a couple of graphs. The bottom line remains the same: There will not be cascading price declines in this cycle due to distressed sales.

In a 2005 post, I included a graph of household mortgage debt as a percent of GDP. Several readers asked if I could update the graph.

First, from February 2005 (19 years ago!):

The following chart shows household mortgage debt as a % of GDP. Although mortgage debt has been increasing for years, the last four years have seen a tremendous increase in debt. Last year alone mortgage debt increased close to $800 Billion - almost 7% of GDP. ...

Many homeowners have refinanced their homes, in essence using their homes as an ATM.

It wouldn't take a RE bust to impact the general economy. Just a slowdown in both volume (to impact employment) and in prices (to slow down borrowing) might push the general economy into recession. An actual bust, especially with all of the extensive sub-prime lending, might cause a serious problem.

And a serious problem is what happened!

There is much more in the article.

by Calculated Risk on 1/15/2024 08:21:00 AM

Altos reports that active single-family inventory was up 1.2% week-over-week.  It is not unusually to get a small increase after the holidays (it happened in 4 of the last 10 years), however inventory will likely decrease a little seasonally until the Spring.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of January 12th, inventory was at 505 thousand (7-day average), compared to 499 thousand the prior week.   

Inventory is still far below pre-pandemic levels.

The second graph shows the seasonal pattern for active single-family inventory since 2015.

The red line is for 2024.  The black line is for 2019.  Note that inventory is up from the record low for the same week in 2022, but still well below normal levels.

Inventory was up 6.7% compared to the same week in 2023 (last week it was up 5.7%), and down 38.0% compared to the same week in 2019 (last week down 39.0%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels is closing.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 1/14/2024 08:11:00 AM

From STR: U.S. hotel results for week ending 6 January

U.S. hotel performance decreased from the previous week, while year-over-year comparisons improved, according to CoStar’s latest data through 6 January. ...

31 December 2023 through 6 January 2024 (percentage change from comparable week in 2023):

• Occupancy: 46.8% (-0.7%)
• Average daily rate (ADR): US$152.17 (+7.2%)
• Revenue per available room (RevPAR): US$71.28 (+6.4%)
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 2024, black is 2020, blue is the median, and dashed light blue is for 2023.  Dashed purple is for 2018, the record year for hotel occupancy. 

The 4-week average of the occupancy rate is tracking close to last year, and above 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 will increase seasonally over the next 3 months.

by Calculated Risk on 1/13/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• 2nd Look at Local Housing Markets in December It appears annual sales for 2023 will be at the lowest level since 1995

• Moody's: Apartment Vacancy Rate increased in Q4; Office Vacancy Rate in "Uncharted Territory" at Record High

• Part 1: Current State of the Housing Market; Overview for mid-January 2024

• Part 2: Current State of the Housing Market; Overview for mid-January 2024

• 1st Look at Local Housing Markets in December

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 1/13/2024 08:11:00 AM

The key reports this week are December retail sales, housing starts and existing home sales.

For manufacturing, the December Industrial Production report and the January New York and Philly Fed manufacturing surveys will be released.

----- Monday, January 15th -----
All US markets will be closed in observance of Martin Luther King Jr. Day

----- Tuesday, January 16th -----
8:30 AM: The New York Fed Empire State manufacturing survey for January. The consensus is for a reading of -7.1, up from -14.5.

----- Wednesday, January 17th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Retail sales for December is scheduled to be released.  The consensus is for a 0.3% 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).

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

This graph shows industrial production since 1967.

The consensus is for a 0.1% decrease in Industrial Production, and for Capacity Utilization to decrease to 78.6%.

10:00 AM: The January NAHB homebuilder survey. The consensus is for a reading of 38, up from 37 in December. Any number below 50 indicates that more builders view sales conditions as poor than good.

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, January 18th -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 204 thousand, up from 202 thousand.

8:30 AM: Housing Starts for December.

This graph shows single and multi-family housing starts since 1968.

The consensus is for 1.415 million SAAR, down from 1.560 million SAAR.

8:30 AM: the Philly Fed manufacturing survey for January. 

----- Friday, January 19th -----
10:00 AM: Existing Home Sales for December from the National Association of Realtors (NAR). The consensus is for 3.84 million SAAR, up from 3.82 million.

The graph shows existing home sales from 1994 through the report last month.

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

by Calculated Risk on 1/12/2024 07:54:00 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.

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Hospitalizations have almost sextupled from a low of 5,150 in June 2023.

Hospitalizations are about 20% of the peak of 150,000 in January 2022.

COVID Metrics
	Now	Week Ago	Goal
Hospitalized2🚩	29,285	26,079	≤3,0001
Deaths per Week2	1,500	1,689	≤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 more than tripled from a low of 485 in early July.  Still weekly deaths are far below the weekly peak of 26,000 in January 2021.

And here is a new graph I'm following on COVID in wastewater as of Jan 11th:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater might have peaked at the highest level since January 2022 (about half that peak).

by Calculated Risk on 1/12/2024 01:00:00 PM

From BofA:

Overall, since our last weekly publication, our 4Q US GDP tracking estimate is up two-tenths to 1.3% q/q saar, while 3Q GDP finalized at 4.9% q/q saar in the third estimate. [Jan 12th estimate]
emphasis added

From Goldman:

We left our Q4 GDP tracking estimate unchanged at +1.5% (qoq ar) and our Q4 domestic final sales growth forecast unchanged at +2.2% (qoq ar). [Jan 10th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2023 is 2.2 percent on January 10, unchanged from January 9 after rounding. [Jan 10th estimate]