by Calculated Risk on 1/30/2024 12:56:00 PM

The Census Bureau released the Residential Vacancies and Homeownership report for Q4 2023 today.

The results of this survey were significantly distorted by the pandemic in 2020.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers. Analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

National vacancy rates in the fourth quarter 2023 were 6.6 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate was higher than the rate in the fourth quarter 2022 (5.8 percent) and virtually the same as the rate in the third quarter 2023 (6.6 percent).

The homeowner vacancy rate of 0.9 percent was not statistically different than the rate in the fourth quarter 2022 (0.8 percent) and not statistically different from the rate in the third quarter 2023 (0.8 percent).

The homeownership rate of 65.7 percent was not statistically different from the rate in the fourth quarter 2022 (65.9 percent) and not statistically different from the rate in the third quarter 2023 (66.0 percent).
emphasis added

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st, 1990, 2000, 2010, and 2020. 

The HVS homeownership rate decreased to 65.7% in Q4, from 66.0% in Q3.  

The results in Q2 and Q3 2020 were distorted by the pandemic and should be ignored.

The HVS homeowner vacancy increased to 0.9% in Q4 from 0.8% in Q3.

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

The homeowner vacancy rate declined sharply during the pandemic and includes homes that are vacant and for sale (so this mirrors the low levels of existing home inventory).

The rental vacancy rate was unchanged at 6.6% in Q4 from 6.6% in Q3.  This is up from 5.8% in Q4 2022.

The quarterly HVS is the timeliest survey on households, but there are many questions about the accuracy of this survey.

by Calculated Risk on 1/30/2024 10:08:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Up 5.1% year-over-year in November

Excerpt:

S&P/Case-Shiller released the monthly Home Price Indices for November ("November" is a 3-month average of September, October and November closing prices). November closing prices include some contracts signed in July, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The MoM increase in the seasonally adjusted Case-Shiller National Index was at 0.24%. This was the ninth consecutive MoM increase, but the smallest increase since February 2023.

On a seasonally adjusted basis, prices increased in 14 of the 20 Case-Shiller cities on a month-to-month basis. Seasonally adjusted, San Francisco has fallen 8.8% from the recent peak, Seattle is down 7.2% from the peak, Portland down 4.5%, and Phoenix is down 3.4%.

There is much more in the article.

by Calculated Risk on 1/30/2024 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings changed little at 9.0 million on the last business day of December, the U.S. Bureau of Labor Statistics reported today. Over the month, the number of hires and total separations were little changed at 5.6 million and 5.4 million, respectively. Within separations, quits (3.4 million) and layoffs and discharges (1.6 million) changed little.
emphasis added

The following graph shows job openings (black 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 December; the employment report this Friday will be for January.

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 is labeled, but off the chart to better show the usual data.

Jobs openings increased in December to 9.03 million from 8.93 million in November.

The number of job openings (black) were down 20% year-over-year. 

Quits were down 17% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 1/30/2024 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for November ("November" is a 3-month average of September, October and November closing prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P S&P CoreLogic Case-Shiller Index Upward Trend Decelerates in November

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in November, up from a 4.7% rise in the previous month. The 10-City Composite showed an increase of 6.2%, up from a 5.7% increase in the previous month. The 20-City Composite posted a year-over-year increase of 5.4%, up from a 4.9% increase in the previous month. Once again, Detroit reported the highest year-over-year gain among the 20 cities with an 8.2% increase in November, followed again by San Diego with an 8% increase. For the third month in a row, Portland fell 0.7% and remained the only city reporting lower prices in November versus a year ago.
...
For the first time since January 2023, the U.S. National Index and 20-City Composite posted 0.2% month-over-month decreases in November, while the 10-City Composite posted a 0.1% decrease.

After seasonal adjustment, the U.S. National Index and the 10-City Composite posted month-overmonth increases of 0.2%, while the 20-City Composite posted a month-over-month increase of 0.1%.

“U.S. home prices edged downward from their all-time high in November,” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P DJI. “The streak of nine monthly gains ended in November, setting the index back to levels last seen over the summer months. Seattle and San Francisco reported the largest monthly declines, falling 1.4% and 1.3%, respectively.”

“November’s year-over-year gain saw the largest growth in U.S. home prices in 2023, with our National Composite rising 5.1% and the 10-city index rising 6.2%. Detroit held its position as the best performing market for the third month in a row, accelerating to an 8.2% gain. San Diego notched an 8% annual gain, retaining its second spot in the nation. Barring a late surge from another market, those cities will vie for the ‘housing market of the year’ as the best performing city in our composite.”

“Six cities registered a new all-time high in November (Miami, Tampa, Atlanta, Charlotte, New York, and Cleveland). Portland remains the lone market in annual decline. The Northeast and Midwest recorded the largest gains with returns of 6.4% and 6.3%, respectively. Other regions are not far behind with the slowest gains in the West of 3%. This month’s report revealed the narrowest spread of performance across the nation since the first quarter of 2021.”

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 0.2% in November (SA) and is at a new all-time high.

The Composite 20 index is up 0.1% (SA) in November and is also at a new all-time high.

The National index is up 0.2% (SA) in November and is also at a new all-time high.

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is up 6.2% year-over-year.  The Composite 20 SA is up 5.4% year-over-year.

The National index SA is up 5.1% year-over-year.

Annual price changes were below expectations.  I'll have more later.

by Calculated Risk on 1/29/2024 07:52:00 PM

From Matthew Graham at Mortgage News Daily: Nice Calm Day For Rates, But Volatility Potential Increases From Here

From here, the next thing that makes great sense is for rates to follow the guidance of the incoming economic data first and foremost. Comments from the Federal Reserve will be a supporting actor until the March Fed meeting.

In other words, we have a Fed meeting coming up in 2 days and we DON'T expect there to be any major fireworks. This week's only pyrotechnic potential comes in the form of several key economic reports in addition to the Treasury department's update on its borrowing needs. [30 year fixed 6.88%]
emphasis added

Tuesday:
• At 9:00 AM ET, FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

• Also at 9:00 AM, S&P/Case-Shiller House Price Index for November. The consensus is for a 5.8% year-over-year increase.

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

• Also at 10:00 AM, The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

by Calculated Risk on 1/29/2024 02:43:00 PM

The BEA released the underlying details for the Q4 advance GDP report on Friday.

The BEA reported that investment in non-residential structures increased at a 3.2% annual pace in Q4.  Investment in petroleum and natural gas structures increased in Q4 compared to Q3 and was up 5% year-over-year.   

Click on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices (blue) increased slightly in Q4 and was up 5.0% year-over-year.  And mostly unchanged as a percent of GDP.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was up about 8% year-over-year in Q4.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment decreased in Q4 compared to Q3, and lodging investment was up 5% year-over-year.

All three sectors - offices, malls, and hotels - were hurt significantly by the pandemic.  And the office vacancy rate is at a record high, and this will push down office investment.

The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single-family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Investment in single family structures was $417 billion (SAAR) (about 1.5% of GDP) and was up 4% year-over-year.

Investment in multi-family structures was up slightly in Q4 to $135 billion (SAAR) from Q3, and up 14% YoY.

Investment in home improvement was at a $345 billion (SAAR) in Q4 (about 1.2% of GDP).  Home improvement spending was strong during the pandemic but has declined as a percent of GDP recently.

Note that Brokers' commissions (black) increased sharply as existing home sales increased in the second half of 2020 but declined when mortgage rates increased.   Brokers' commissions were down 5% year-over-year in Q4.

by Calculated Risk on 1/29/2024 11:54:00 AM

From the Las Vegas Visitor Authority: December 2023 Las Vegas Visitor Statistics

Closing out the year with roughly 3.4M visitors in December, Las Vegas ended 2023 with annual visitation of 40.8M visitors, +5.2% ahead of 2022.

As the convention/group segment strengthened over 2022, annual est. convention attendance neared 6.0M in 2023, roughly 20% ahead of 2022's 5.0M tally.

2023 annual hotel occupancy reached 83.5%, +4.3 pts YoY, as Weekend occupancy reached 90.7% (+1.4 pts YoY) while Midweek occupancy improved to 80.3% for the year, +5.6 pts YoY.

Annual ADR for 2023 surpassed $191, beating last year by 11.9% while RevPAR neared $160, up 18% vs. 2022.
emphasis added

Click on graph for larger image.

The first graph shows visitor traffic for 2019 (Black), 2020 (light blue), 2021 (purple), 2022 (orange), and 2023 (red).

Visitor traffic was up 2.7% compared to last December.  For all of 2023, visitor traffic was up 5.2% compared to 2022.  Visitor traffic was down 2.0% compared to the same month in 2019.

The second graph shows convention traffic.

Convention traffic was down 11.0% compared to December 2022, and down 4.5% compared to November 2019.  

For all of 2023, convention traffic was up 19.9% compared to 2022.

Note: There was almost no convention traffic from April 2020 through May 2021.

by Calculated Risk on 1/29/2024 08:21:00 AM

Altos reports that active single-family inventory was down 0.6% week-over-week.  Inventory will likely decrease a little seasonally until the Spring (it could remain mostly flat for a few months like in 2019).

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of January 26th, inventory was at 503 thousand (7-day average), compared to 506 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 85% from the record low for the same week in 2022, but still well below normal levels.

Inventory was up 7.9% compared to the same week in 2023 (last week it was up 7.1%), and down 39.2% compared to the same week in 2019 (last week down 38.6%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed a little.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 1/28/2024 06:16:00 PM

Weekend:
• Schedule for Week of January 28, 2024

• FOMC Preview: No Change to Policy Expected

Monday:
• 10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 11 and DOW futures are down 91 (fair value).

Oil prices were up over the last week with WTI futures at $78.01 per barrel and Brent at $83.55 per barrel. A year ago, WTI was at $80, and Brent was at $85 - so WTI oil prices were down slightly year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.09 per gallon. A year ago, prices were at $3.50 per gallon, so gasoline prices are down $0.41 year-over-year.

by Calculated Risk on 1/28/2024 08:31:00 AM

Most analysts expect there will be no change to FOMC policy at the meeting this week, keeping the target range for the federal funds rate at 5‑1/4 to 5-1/2 percent.

Currently the market expects the next Fed move to be a 25 bp cut announced at either the March or May FOMC meeting.  The market is pricing in a 2nd cut in June - and a total of around 5 cuts in 2024. 

Based on the recent inflation reports, the FOMC will likely hint at a possible first rate cut in March. Also, Fed Chair Powell might note that the FOMC has started to discuss when to slow balance sheet runoff.

From Goldman Sachs:

"The FOMC will likely aim to keep a March cut on the table without sending a decisive signal by removing the outdated hiking bias from its statement and noting that future policy changes will depend on upcoming inflation and other data."

Projections will not be released at this meeting. For review, here are the December projections.  Since the last projections were released, the economy has performed better than the FOMC expected, and inflation was lower than expected.

The BEA reported real GDP increased 3.1% Q4 over Q4 in 2023.  This was solidly above the December projections.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2023	2024	2025	2026
Dec 2023	2.5 to 2.7	1.2 to 1.7	1.5 to 2.0	1.8 to 2.0
Sept 2023	1.9 to 2.2	1.2 to 1.8	1.6 to 2.0	1.7 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.7% in December and averaged just under 3.8% for Q4. The FOMC's unemployment rate projection for Q4 was close.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2023	2024	2025	2026
Dec 2023	3.8	4.0 to 4.2	4.0 to 4.2	3.9 to 4.3
Sept 2023	3.7 to 3.9	3.9 to 4.4	3.9 to 4.3	3.8 to 4.3

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of December 2023, PCE inflation increased 2.6 percent year-over-year (YoY).  On a Q4-over-Q4 basis, PCE inflation increased 2.6%, lower than the December projection. 

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2023	2024	2025	2026
Dec 2023	2.7 to 2.9	2.2 to 2.5	2.0 to 2.2	2.0
Sept 2023	3.2 to 3.4	2.3 to 2.7	2.0 to 2.3	2.0 to 2.2

PCE core inflation increased 2.9 percent YoY in December. On a Q4-over-Q4 basis, PCE inflation increased 3.0%, lower than the December projection.  

Over the last 6 months, the PCE Price Index increase 2.0% annualized, the core PCE price index increased at a 1.9% annual rate, and core PCE minus Housing increased 1.1% annualized suggesting that 2024 projections are too high.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2023	2024	2025	2026
Dec 2023	3.2 to 3.3	2.4 to 2.7	2.0 to 2.2	2.0 to 2.1
Sept 2023	3.6 to 3.9	2.5 to 2.8	2.0 to 2.4	2.0 to 2.3