by Calculated Risk on 11/12/2024 02:00:00 PM

From the Federal Reserve: The October 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices

The October 2024 Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) addressed changes in the standards and terms on, and demand for, bank loans to businesses and households over the past three months, which generally correspond to the third quarter of 2024.

Regarding loans to businesses over the third quarter, survey respondents reported, on balance, basically unchanged lending standards for commercial and industrial (C&I) loans to large and middle-market firms and tighter standards for loans to small firms.2 Meanwhile, banks reported weaker demand for C&I loans to firms of all sizes. Furthermore, banks reported tighter standards and weaker demand for all commercial real estate (CRE) loan categories.

For loans to households, banks reported, on balance, basically unchanged lending standards and weaker demand across most categories of residential real estate (RRE) loans. In addition, banks reported basically unchanged lending standards and demand for home equity lines of credit (HELOCs). Moreover, standards reportedly tightened for credit card loans and remained basically unchanged for auto and other consumer loans, while demand weakened for auto and other consumer loans and remained basically unchanged for credit card loans.
emphasis added

Click on graph for larger image.

This graph on Residential Real Estate demand is from the Senior Loan Officer Survey Charts.

This graph is for demand and shows that demand has declined.

The left graph is from 1990 to 2014.  The right graph is from 2015 to Q3 2024.

by Calculated Risk on 11/12/2024 12:03:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the October 2024 seasonally adjusted annual sales rate (SAAR) of 477 thousand.

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 record high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

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 288 thousand SAAR in May 2020.  

Heavy truck sales were at 390 thousand SAAR in October, down from 476 thousand in September, and down 14.4% from 455 thousand SAAR in October 2023.  

Usually, heavy truck sales decline sharply prior to a recession.  This is just one month, and sales might have been impacted by the hurricanes (and could be revised up).

Meanwhile, as I mentioned earlier, light vehicle sales increased in October.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.  Vehicle sales were at 16.04 million SAAR in October, up from 15.77 million in September, and up 4.5% from 15.34 million in October 2023.

by Calculated Risk on 11/12/2024 09:26:00 AM

Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in October

A brief excerpt:

NOTE: The tables for active listings, new listings and closed sales all include a comparison to October 2019 for each local market (some 2019 data is not available).

This is the second look at local markets in October. I’m tracking over 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in October were mostly for contracts signed in August and September when 30-year mortgage rates averaged 6.50% and 6.18%, respectively (Freddie Mac PMMS). These were the lowest mortgage rate in 2 years!
...
Here is a look at months-of-supply using NSA sales. Note the regional differences, especially in Florida (although October statistics in Florida were impacted by Hurricane Milton). This pickup in inventory is impacting prices in Florida.
...
Many more local markets to come!

There is much more in the article.

by Calculated Risk on 11/11/2024 08:24:00 PM

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for October.

• At 2:00 PM, Senior Loan Officer Opinion Survey on Bank Lending Practices (SLOOS) for October.

by Calculated Risk on 11/11/2024 02:28:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Watch Months-of-Supply!

A brief excerpt:

Both inventory and sales are well below pre-pandemic levels, and I think we need to keep an eye on months-of-supply to forecast price changes. Historically nominal prices declined when months-of-supply approached 6 months - and that is unlikely any time soon - however, as expected, months-of-supply is above 2019 levels.

Months-of-supply was at 4.3 months in September compared to 4.0 months in September 2019. Even though inventory has declined significantly compared to 2019, sales have fallen even more - pushing up months-of-supply.

The following graph shows months-of-supply since 2017. Note that months-of-supply is higher than the last 5 years (2019 - 2023), and just below the level in September 2018. Months-of-supply was at 4.2 in September 2017 and 4.4 in September 2018. In 2020 (black), months-of-supply increased at the beginning of the pandemic and then declined sharply.

There is much more in the article.

by Calculated Risk on 11/11/2024 11:53:00 AM

After the election in November 2016, I pointed out that the economy was solid, that there were significant economic tailwinds and that it was unlikely that Mr. Trump would do everything he said during the campaign (emphasis added). See: The Future is still Bright! and The Cupboard is Full. I was pretty optimistic on the economic outlook!

By early 2019, I was becoming more concerned: "So far Mr. Trump has had a limited negative impact on the economy. ... Fortunately the cupboard was full when Trump took office, and luckily there hasn't been a significant crisis".  Unfortunately, the COVID crisis struck in early 2020 and Trump performed poorly.

Once again, the economy is in good shape (last week Fed Chair Powell called the economy "remarkable"), and it is unlikely Mr. Trump will do most of what he said during the campaign.  For example, he promised no taxes on tips or overtime, the return of $2 gasoline, repealing and replacing the ACA, and deporting 20+ million people.  All of that is unlikely.  There are many other proposals, such as revamping the Federal workforce and dramatically cutting the Federal budget, that are unclear.

Trump will likely renew the tax cuts for the wealthy, increase tariffs - especially on imports from China - limit legal immigration (Trump said the "Country is full"), and increase deportations (but not anywhere close to the 20 million he said during the campaign).  Note: I don't expect any tariffs on Canada and Mexico.

However, the economic tailwinds are more limited in 2024 than in 2016, so the margin for error is smaller.

For example, in 2016, I was positive on housing starts and new home sales.  

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

The black arrow points to the election in 2016, and I was projecting further increases in housing starts.

It now seems likely that housing starts will move more sideways.

Also, in 2016, demographics were improving, and the largest cohort in US history was moving into their peak earning years.  Now, demographics are more neutral, and possibly even negative if legal immigration is limited.

Also, I don't expect any progress over the next four years on key long-term economic issues like climate change and income / wealth inequality (that will likely get worse).

Since Trump's policies will not be evidence based (he rejects data that doesn't fit his views), I expect generally bad results. However - as in his previous term - bad policies might mean higher deficits with little return - not an economic downturn. Until we see the actual policy proposals, it is hard to predict the impact. I will write more as policies are enacted.  However, I'm not sanguine.

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

Altos reports that active single-family inventory was down 1.9% week-over-week. 

Inventory will now decline seasonally until early next year.

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

Click on graph for larger image.

The red line is for 2024.  The black line is for 2019.  

Inventory was up 27.3% compared to the same week in 2023 (last week it was up 29.8%), and down 19.2% compared to the same week in 2019 (last week it was down 19.4%). 

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

This second inventory graph is courtesy of Altos Research.

As of Nov 8th, inventory was at 722 thousand (7-day average), compared to 736 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 11/10/2024 07:35:00 PM

Weekend:
• Schedule for Week of November 10, 2024

Monday:
• Veterans Day Holiday: Most banks will be closed in observance of Veterans Day. The stock market will be open.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 12 and DOW futures are up 45 (fair value).

Oil prices were up over the last week with WTI futures at $70.28 per barrel and Brent at $73.83 per barrel. A year ago, WTI was at $76, and Brent was at $84 - so WTI oil prices are down about 8% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.04 per gallon. A year ago, prices were at $3.36 per gallon, so gasoline prices are down $0.32 year-over-year.

by Calculated Risk on 11/10/2024 09:58:00 AM

From Dodge Data Analytics: Dodge Momentum Index Retreats 5% in October

The Dodge Momentum Index (DMI), issued by Dodge Construction Network, decreased 5.3% in October to 197.2 (2000=100) from the revised September reading of 208.2. Over the month, commercial planning fell 6.7% and institutional planning declined 2.0%.

“In addition to data center planning normalizing, a moderate pullback in the number of planning projects for several other nonresidential sectors also contributed to the decline in the Dodge Momentum Index for October,” stated Sarah Martin, associate director of forecasting at Dodge Construction Network. “Regardless, owners and developers remain confident in next year’s market conditions and the planning queue remains poised to spur stronger construction activity in 2025, following deeper rate cuts by the Fed.”

Most commercial categories faced declines throughout October, aside from hotel planning – which continued to gain momentum. On the institutional side, education and public planning activity expanded, offset by weaker activity in healthcare, recreational and religious projects. This month, the DMI was 13% higher than in October of 2023. The commercial segment was up 18% from year-ago levels, while the institutional segment was up 3% over the same period. The influence of data centers on the DMI this year has been substantial. If we remove all data center projects from January to October, commercial planning would be down 4% from year-ago levels, and the entire DMI would be down 2%.
...
The DMI is a monthly measure of the value of nonresidential building projects going into planning, shown to lead construction spending for nonresidential buildings by a full year.
emphasis added

Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 197.2 in October, down from 208.2 the previous month.

According to Dodge, this index leads "construction spending for nonresidential buildings by a full year".  This index suggests a slowdown in early 2025, but a pickup in mid-2025.  

Commercial construction is typically a lagging economic indicator.

by Calculated Risk on 11/09/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• In Q2, almost 20% of Units Started Built-for-Rent were Single Family

• MBA: Mortgage Delinquencies Decreased Slightly in Q3 2024

• 1st Look at Local Housing Markets in October First Year-over-year Sales Gain Since August 2021

• Asking Rents Mostly Unchanged Year-over-year

• ICE Mortgage Monitor: "Annual home price growth cooled for the seventh consecutive month"

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