by Calculated Risk on 2/23/2024 04:03:00 PM

From STR: U.S. hotel results for week ending 17 February

.S. hotel performance increased from the previous week, while year-over-year comparisons remained mixed, according to CoStar’s latest data through 17 February. ...

11-17 February 2024 (percentage change from comparable week in 2023):

• Occupancy: 59.2% (-2.5%)
• Average daily rate (ADR): US$162.24 (+4.2%)
• Revenue per available room (RevPAR): US$96.10 (+1.6%)
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 just below last year, and below the median rate for the period 2000 through 2023 (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 several weeks.

by Calculated Risk on 2/23/2024 11:43:00 AM

From BofA:

On net, this week’s data boosted our 1Q US GDP tracking estimate by a tenth to 1.0% q/q saar. Our 4Q tracking estimate also increased by a tenth to 3.2% q/q saar [Feb 23rd estimate]
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From Goldman:

We boosted our Q1 GDP tracking estimate by 0.1pp to +2.4% (qoq ar) and our Q1 domestic final sales growth forecast by 0.1pp to +2.7% (qoq ar). [Feb 22nd estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2024 is 2.9 percent on February 16, unchanged from February 15. [Feb 16th estimate] (next release will be on Feb 27th)

by Calculated Risk on 2/23/2024 08:11:00 AM

From ICE (formerly Black Knight): ICE First Look at Mortgage Performance: Foreclosures Up but Delinquencies Improve as the Mortgage Market Kicks Off 2024

• In an expected rebound from December’s calendar-driven rise, the national delinquency rate dropped to 3.38% in January, the lowest since October, and flat from the same time last year

• Past-due mortgages were down across the board, as inflows and rolls to later stages of delinquency fell, while early- and late-stage delinquency cures improved

• Serious delinquencies (loans 90+ days past due but not in active foreclosure) were down 109K (-19%) year over year, with the population now at 470K

• Representing 7.2% of serious delinquencies, January’s 34K foreclosure starts – the most since April 2022 – marked a +43.3% month over month jump, driven in part by seasonal pressures

• The number of loans in active foreclosure rose 7K to 219K, but remained 23% below (-64K) pre-pandemic levels

• 6.6K foreclosure sales were completed nationally in January, a 23% increase from the previous month but in line with the monthly average for the preceding year

• While January’s jump in foreclosures is worth watching, serious delinquencies remain low, with 70% of such loans still protected from foreclosure, reducing near-term risk

• Prepayment activity rose marginally as easing interest rates in December and January provided a modest increase in refinance incentive and homebuyer demand
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Note: that last column below is for the same month in 2019 to show the change from pre-pandemic levels.

ICE: Percent Loans Delinquent and in Foreclosure Process
	Jan 2024	Dec 2023	Jan 2023	Jan 2019
Delinquent	3.38%	3.57%	3.38%	3.75%
In Foreclosure	0.41%	0.40%	0.45%	0.51%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	1,803,000	1,908,000	1,775,000	1,945,000
Number of properties in foreclosure pre-sale inventory:	219,000	212,000	238,000	265,000
Total Properties	2,022,000	2,120,000	2,012,000	2,210,000

by Calculated Risk on 2/22/2024 02:28:00 PM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For January, Realtor.com reported inventory was up 7.9% YoY, and down 40% compared to January 2019. Now - on a weekly basis - inventory is up 15.7% YoY, and that would put inventory still down about 39% compared to February 2019.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View — Data Week Ending February 17, 2024

• Active inventory increased, with for-sale homes 15.7% above year ago levels.

For a 15th consecutive week, active listings registered above prior year level, which means that today’s home shoppers have more homes to choose from that aren’t already in the process of being sold. So far this season, the increase in newly listed homes has resulted in a boost to overall inventory, but while the added inventory has certainly improved conditions from this time in 2021 through 2023, overall inventory is still low compared to the same time in February 2020 and years prior to the COVID-19 Pandemic.

• New listings–a measure of sellers putting homes up for sale–were up this week, by 10.9% from one year ago.

Newly listed homes were above last year’s levels for the 17th week in a row, which could further contribute to a recovery in active listings meaning more options for home shoppers. This past week, newly listed homes were up 10.9% from a year ago, accelerating slightly from the 9.5% growth rate seen in the previous week.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 154th consecutive week following 20 consecutive weeks with a YoY decrease in inventory.  

Inventory is still historically very low.

Although new listings remain well below "typical pre-pandemic levels", new listings are now up YoY for the 17th consecutive week.

by Calculated Risk on 2/22/2024 10:48:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: NAR: Existing-Home Sales Increased to 4.00 million SAAR in January

Excerpt:

Sales Year-over-Year and Not Seasonally Adjusted (NSA)

The fourth graph shows existing home sales by month for 2023 and 2024.

Sales declined 1.7% year-over-year compared to January. This was the twenty-ninth consecutive month with sales down year-over-year. This was just above the cycle low of 3.85 million SAAR in October 2023.

There is much more in the article.

by Calculated Risk on 2/22/2024 10:00:00 AM

From the NAR: Existing-Home Sales Rose 3.1% in January

Existing-home sales grew in January, according to the National Association of REALTORS®. Among the four major U.S. regions, sales accelerated in the Midwest, South and West, and remained steady in the Northeast. Year-over-year, sales improved in the West, and decreased in the Northeast, Midwest and South.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – elevated 3.1% from December to a seasonally adjusted annual rate of 4.00 million in January. Year-over-year, sales slipped 1.7% (down from 4.07 million in January 2023).
...
Total housing inventory registered at the end of January was 1.01 million units, up 2.0% from December and 3.1% from one year ago (980,000). Unsold inventory sits at a 3.0-month supply at the current sales pace, down from 3.1 months in December but up from 2.9 months in January 2023.
emphasis added

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1994.

Sales in January (4.00 million SAAR) were up 3.1% from the previous month and were 1.7% below the January 2023 sales rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.01 million in January from 0.99 million the previous month.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory was up 3.1% year-over-year (blue) in January compared to January 2023.

Months of supply (red) decreased to 3.0 months in January from 3.1 months the previous month.

This was above the consensus forecast. I'll have more later. 

by Calculated Risk on 2/22/2024 08:30:00 AM

The DOL reported:

In the week ending February 17, the advance figure for seasonally adjusted initial claims was 201,000, a decrease of 12,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 212,000 to 213,000. The 4-week moving average was 215,250, a decrease of 3,500 from the previous week's revised average. The previous week's average was revised up by 250 from 218,500 to 218,750.
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The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims decreased to 215,250.

The previous week was revised up.

Weekly claims were below the consensus forecast.

by Calculated Risk on 2/21/2024 07:40:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 215 thousand initial claims, up from 212 thousand last week.

• Also at 8:30 AM, Chicago Fed National Activity Index for January. This is a composite index of other data.

• At 10:00 AM, Existing Home Sales for January from the National Association of Realtors (NAR). The consensus is for 3.97 million SAAR, up from 3.78 million. Housing economist Tom Lawler estimates the NAR will report sales of 4.02 million SAAR.

• At 11:00 AM, the Kansas City Fed manufacturing survey for February.

by Calculated Risk on 2/21/2024 02:00:00 PM

From the Fed: Minutes of the Federal Open Market Committee, January 30–31, 2024. Excerpt:

In discussing risk-management considerations that could bear on the policy outlook, participants remarked that while the risks to achieving the Committee's employment and inflation goals were moving into better balance, they remained highly attentive to inflation risks. In particular, they saw upside risks to inflation as having diminished but noted that inflation was still above the Committee's longer-run goal. Some participants noted the risk that progress toward price stability could stall, particularly if aggregate demand strengthened or supply-side healing slowed more than expected. Participants highlighted the uncertainty associated with how long a restrictive monetary policy stance would need to be maintained. Most participants noted the risks of moving too quickly to ease the stance of policy and emphasized the importance of carefully assessing incoming data in judging whether inflation is moving down sustainably to 2 percent. A couple of participants, however, pointed to downside risks to the economy associated with maintaining an overly restrictive stance for too long.

Participants observed that the continuing process of reducing the size of the Federal Reserve's balance sheet was an important part of the Committee's overall approach to achieving its macroeconomic objectives and that balance sheet runoff had so far proceeded smoothly. In light of ongoing reductions in usage of the ON RRP facility, many participants suggested that it would be appropriate to begin in-depth discussions of balance sheet issues at the Committee's next meeting to guide an eventual decision to slow the pace of runoff. Some participants remarked that, given the uncertainty surrounding estimates of the ample level of reserves, slowing the pace of runoff could help smooth the transition to that level of reserves or could allow the Committee to continue balance sheet runoff for longer. In addition, a few participants noted that the process of balance sheet runoff could continue for some time even after the Committee begins to reduce the target range for the federal funds rate.
emphasis added

by Calculated Risk on 2/21/2024 10:49:00 AM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: AIA/Deltek Architecture Billings Index Reports Sluggish Conditions to Start 2024

Architecture firm billings remained soft entering into 2024, with an AIA/Deltek Architecture Billings Index (ABI) score of 46.2 in January. Any score below 50.0 indicates decreasing business conditions.

“This now marks the lengthiest period of declining billings since 2010, although it is reassuring that the pace of this decline is less rapid and the broader economy showed improvement in January,” said Kermit Baker, PhD, AIA Chief Economist. "Firms are seeing growth with inquiries into new projects and value of newly signed design contracts is holding steady, showing potential signs of interest from clients in new projects.”

Business conditions remained weak at firms in all regions of the country except the Midwest, where modest growth was seen in three of the last four months. Firms with a multifamily residential specialization continue to report the softest business conditions of all specializations.
emphasis added

• Regional averages: Northeast (43.6); Midwest (50.9); South (45.2); West (46.6)

• Sector index breakdown: commercial/industrial (47.0); institutional (48.5); mixed practice (firms that do not have at least half of their billings in any one other category) (42.9); multifamily residential (44.6)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 46.2 in January, down from 46.5 in December.  Anything below 50 indicates a decrease in demand for architects' services.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This index usually leads CRE investment by 9 to 12 months, so this index suggests a slowdown in CRE investment in 2024.

Note that multi-family billing turned down in August 2022 and has been negative for eighteen consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.