by Calculated Risk on 12/23/2024 10:49:00 AM

Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Increase to 664,000 Annual Rate in November

Brief excerpt:

The Census Bureau reported New Home Sales in November were at a seasonally adjusted annual rate (SAAR) of 664 thousand. The previous three months were revised up, combined.
...
The next graph shows new home sales for 2023 and 2024 by month (Seasonally Adjusted Annual Rate). Sales in November 2024 were up 8.7% from November 2023.

New home sales, seasonally adjusted, have increased year-over-year in 18 of the last 20 months. Note that sales the previous month - October 2024 - were impacted by the hurricanes.

There is much more in the article.

by Calculated Risk on 12/23/2024 10:00:00 AM

The Census Bureau reports New Home Sales in November were at a seasonally adjusted annual rate (SAAR) of 664 thousand.

The previous three months were revised up, combined.

Sales of new single-family houses in November 2024 were at a seasonally adjusted annual rate of 664,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.9 percent above the revised October rate of 627,000 and is 8.7 percent above the November 2023 estimate of 611,000.
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

New home sales were below pre-pandemic levels.

The second graph shows New Home Months of Supply.

The months of supply decreased in November to 8.9 months from 9.2 months in October.

The all-time record high was 12.2 months of supply in January 2009. The all-time record low was 3.3 months in August 2020.

This is well above the top of the normal range (about 4 to 6 months of supply is normal).

"The seasonally-adjusted estimate of new houses for sale at the end of November was 490,000. This represents a supply of 8.9 months at the current sales rate."

Sales were above expectations of 650 thousand SAAR, and sales for the three previous months were revised up, combined. I'll have more later today.

by Calculated Risk on 12/23/2024 08:11:00 AM

Altos reports that active single-family inventory was down 2.2% week-over-week.  Inventory is now 9.7% below the peak for the year (9 weeks ago).

Inventory will continue to decline seasonally until early next year and probably bottom in January or February.

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 26.3% compared to the same week in 2023 (last week it was up 26.6%), and down 16.9% compared to the same week in 2019 (last week it was down 17.0%). 

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

This second inventory graph is courtesy of Altos Research.

As of Dec 20th, inventory was at 667 thousand (7-day average), compared to 682 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 12/22/2024 06:21:00 PM

Weekend:
• Schedule for Week of December 22, 2024

• Ten Economic Questions for 2025

Monday:
• At 8:30 AM ET,Chicago Fed National Activity Index for November. This is a composite index of other data.

• Also at 8:30 AM, Durable Goods Orders for November.  The consensus is for a 0.4% decrease.

• At 10:00 AM, New Home Sales for November from the Census Bureau. The consensus is for 650 thousand SAAR, up from 610 thousand in October.  Sales in October were impacted by the hurricanes, with the South region down 27.7% year-over-year.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 futures are up 23 and DOW futures are up 147 (fair value).

Oil prices were up over the last week with WTI futures at $69.46 per barrel and Brent at $72.94 per barrel. A year ago, WTI was at $73, and Brent was at $80 - so WTI oil prices are down about 5% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.03 per gallon. A year ago, prices were at $3.10 per gallon, so gasoline prices are down $0.07 year-over-year.

by Calculated Risk on 12/22/2024 10:07:00 AM

Here is a review of the Ten Economic Questions for 2024.

Below are my ten questions for 2025 (I've been doing this online every year for 20 years!).  These are just questions; I'll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework of how the U.S. economy will likely perform in 2025, and if there are surprises - like in 2020 with the pandemic - to adjust my thinking.

There is significant uncertainty as to fiscal and regulatory policy in 2025.  There were many promises made during the campaign that obviously will not happen (deport 20 million people, no taxes on tips, overtime or Social Security benefits, 200% tariffs, and on and on).  

We can assume the 2017 Tax Cuts and Jobs Act (TCJA) will be extended.  That larger tariffs will be imposed on some imports, and there will be some deregulation.  There is also the potential for significant policy mistakes, but for now I'm assuming any policy changes will not significantly impact the economy in 2025. 

 

1) Economic growth: Economic growth was probably close to 2.8% in 2024 (around 2.6% Q4-over-Q4).  The FOMC is expecting growth of 1.8% to 2.2% Q4-over-Q4 in 2025. How much will the economy grow in 2025?  Will there be a recession in 2025?

2) Employment: Through November 2024, the economy added 2.0 million jobs in 2024.   This is down from 3.0 million jobs added in 2023, 4.8 million in 2022, and 7.3 million in 2021 (2021 and 2022 were the two best years ever), but still a solid year for employment gains. How much will job growth slow in 2025?  Or will the economy lose jobs? 

3) Unemployment Rate: The unemployment rate was at 4.2% in November, up from 3.7% in November 2023.   Currently the FOMC is projecting the unemployment rate will increase to the 4.2% to 4.5% range in Q4 2025.  What will the unemployment rate be in December 2025?

4) Participation Rate: In November 2024, the overall participation rate was at 62.5%, down year-over-year from 62.8% in November 2023, and below the pre-pandemic level of 63.3% in February 2020.   Long term, the BLS is projecting the overall participation rate will decline to 61.2% by 2033 due to demographics.  What will the participation rate be in December 2025?

5) Inflation: Core PCE was up 2.8% YoY through November. This was down from a peak of 5.6% in early 2022.  The FOMC is forecasting the YoY change in core PCE will be in the 2.5% to 2.7% range in Q4 2025. Will the core inflation rate decrease further in 2025, and what will the YoY core inflation rate be in December 2025? 

6) Monetary Policy:  The FOMC cut the federal funds rate four times in 2024 from "5-1/4 to 5-1/2 percent" at the beginning of 2024, to "4-1/4 to 4-1/2" at the end of the year. Most FOMC participants expect around two 25 bp rate cuts in 2025.  What will the Fed Funds rate be in December 2025?

7) Wage Growth: Wage growth was solid in 2024, up 4.0% year-over-year as of November.  How much will wages increase in 2025?

8) Residential Investment: Residential investment (RI) was slightly positive through the first three quarters of 2024.  Through November, starts were down 4.3% year-to-date compared to the same period in 2023 (due to a sharp decline in multi-family starts). New home sales were up 2.1% year-to-date through October.  Note: RI is mostly investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales.  How much will RI change in 2025?  How about housing starts and new home sales in 2025?

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be up 3% to 4% in 2024.  What will happen with house prices in 2025?

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022.  Since then, inventory has increased but is still below pre-pandemic levels.  Will inventory increase further in 2025?

by Calculated Risk on 12/21/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• NAR: Existing-Home Sales Increased to 4.15 million SAAR in November

• Housing Starts Decreased to 1.289 million Annual Rate in November

• 4th Look at Local Housing Markets in November

• Lawler: Early Read on Existing Home Sales in November

• 3rd Look at Local Housing Markets in November

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

by Calculated Risk on 12/21/2024 08:11:00 AM

Happy Holidays and Merry Christmas!

The key economic report this week is November New Home Sales.

Update from Census:

"Due to the executive order closing the federal government on December 24, 2024, the Monthly Advance Report on Manufacturers’ Shipments, Inventories and Orders will now be released on Monday, December 23 at 8:30 a.m. and the New Residential Sales report will be released on Monday, December 23 at 10:00 a.m."

----- Monday, December 23rd -----
8:30 AM: Chicago Fed National Activity Index for November. This is a composite index of other data.

8:30 AM: Durable Goods Orders for November.  The consensus is for a 0.4% decrease.

10:00 AM: New Home Sales for November from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the sales rate for last month.

The consensus is for 650 thousand SAAR, up from 610 thousand in October.  Sales in October were impacted by the hurricanes, with the South region down 27.7% year-over-year.

----- Tuesday, December 24th -----
10:00 AM: Richmond Fed Survey of Manufacturing Activity for December.

The NYSE and the NASDAQ will close early at 1:00 PM ET.

----- Wednesday, December 25th -----
All US markets will be closed in observance of the Christmas Holiday.

----- Thursday, December 26th -----
8:30 AM: The initial weekly unemployment claims report will be released. Initial claims were at 220 thousand last week.

----- Friday, December 27th -----
No major economic releases scheduled.

by Calculated Risk on 12/20/2024 07:11:00 PM

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

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

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	426	507	≤3501
1my goals to stop weekly posts, 🚩 Increasing number weekly for Deaths ✅ Goal met.

Click on graph for larger image.

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

Although weekly deaths met the original goal to stop posting, I'm continuing to post now that deaths are above the goal again - and at a minimum, I'll continue to post through the Winter.  

Weekly deaths are now declining but might start to increase based on wastewater sampling.  Weekly deaths are still above the low of 313 in early June 2024.

And here is a graph I'm following concerning COVID in wastewater as of December 14th:

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

COVID in wastewater is "moderate" according to the CDC - but more than double the lows of last May - and increasing sharply.  Something to watch.

by Calculated Risk on 12/20/2024 02:45:00 PM

From WardsAuto: December U.S. Light-Vehicle Sales Brighten Lackluster Year; Unusually High Drain on Inventory (pay content).  Brief excerpt:

Improved affordability is the main thrust to the end-of-year improvement in demand, with higher consumer confidence also likely a contributing factor. But uncertainty over next year could be pulling sales into December, as some consumers could be expecting prices to rise depending on the extent of tariff increases or the possibility that EV credits will be eliminated.
emphasis added

Click on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for December (Red).

On a seasonally adjusted annual rate basis, the Wards forecast of 16.7 million SAAR, would be up 1.2% from last month, and up 4.9% from a year ago.

by Calculated Risk on 12/20/2024 12:04:00 PM

At the end of each year, I post Ten Economic Questions for the following year (2024). I followed up with a brief post on each question. Here is review (we don't have all data yet, but enough).  I've linked to my posts from the beginning of the year, with a brief excerpt and a few comments.

I don't have a crystal ball, but I think it helps to outline what I think will happen - and understand - and change my mind, when the outlook is wrong.  As an example, when the pandemic hit, I switched from being mostly positive on the economy to calling a recession in early March 2020.

Here were my questions for 2024 (posted in December 2023).  The analysis for the housing related questions were posted in the newsletter, and the other questions on this blog.

10) Question #10 for 2024: Will inventory increase further in 2024?

"The bottom line is inventory will probably increase year-over-year in 2024. However, it seems unlikely that inventory will be back up to the 2019 levels."

That was correct.

Here is a graph from Altos Research showing active single-family inventory through December 16, 2023.

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 2021, and up 26% compared to the same week last year.

However, inventory is still below pre-pandemic normal levels. 

9) Question #9 for 2024: What will happen with house prices in 2024?

"I don’t expect inventory to reach 2019 levels but based on the recent increase in inventory maybe more than half the gap between 2019 and 2023 levels will close in 2024. If existing home sales remain sluggish, we could see months-of-supply back to 2017 - 2019 levels.

That would likely put price increases in the 3% to 4% range in 2024. I don’t expect either a crash in prices or a surge in prices. "

That was correct.

As of September, the National Case-Shiller index SA was up 3.9% year-over-year. (Case-Shiller for October will be released December 31st).

The FHFA index was up 4.3% YoY in October, and the Freddie Mac index was up 3.7%. 

 The ICE HPI was up 3.0% in November.

And no crash or surge in house prices in 2024.  

8) Question #8 for 2024: How much will Residential investment change in 2024? How about housing starts and new home sales in 2024?

"My guess is multi-family starts will decline further in 2024, likely down 25% or so year-over-year. Single family starts will likely be mostly unchanged year-over-year, putting total starts down close to 10%. I expect New Home sales to be up around 5% YoY."

This was close.

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

As of November, single family starts were up 7.2% year-to-date (YTD) compared to the same period in 2023.  Single family starts were a little stronger than expected.

Multi-family starts were down 28.9% YTD (pretty close!).

Total starts were down 4.3% YTD.


The next graph shows new home sales as of October (November sales will be released next week).

New home sales were up 2.1% YTD in October. 

Note that sales in October were impacted by the hurricanes, and I expect some bounce back in November.

That will likely put YTD sales even closer to my guess.

7) Question #7 for 2024: How much will wages increase in 2024?

"Clearly wage growth is slowing and I expect to see some further decreases in both the Average hourly earnings from the CES, and in the Atlanta Fed Wage Tracker. My sense is nominal wages will increase close to 3.5% YoY in 2024 according to the CES. "

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees from the Current Employment Statistics (CES).  

There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Excluding the pandemic spike, wage growth peaked at 5.9% YoY in March 2022 and declined to 3.6% in July 2024.  However, wages have ticked up to 4.0% YoY in November.

6) Question #6 for 2024: What will the Fed Funds rate be in December 2024?

"My guess is there will be around 5 rate cuts in 2024 ... I also expect the FOMC to start discussing slowing balance sheet runoff late in the year."

There were 4 rate cuts in 2024 with the Fed Funds rate target range at 4-1/4 to 4-1/2 percent in December 2024. There has also been some discussion of slowing balance sheet runoff.

5) Question #5 for 2024: What will the YoY core inflation rate be in December 2024?

"My guess is core PCE inflation (year-over-year) will decrease in 2024 (from the current 3.2%), and I think core PCE inflation will be close to the Fed's target by Q4 2024."

According to the November Personal Income and Outlays report released this morning, the November PCE price index increased 2.4 percent year-over-year, and the November PCE price index, excluding food and energy, increased 2.8 percent year-over-year. Inflation declined, but not as much as expected.

4) Question #4 for 2024: What will the participation rate be in December 2024?

"There are probably a few more people that will return to the workforce in 2024, pushing up the participation rate. However, demographics will be pushing the rate down. So, my guess is the participation rate will decline slightly in 2024 to around 62.3%"

My guess was close.

The Labor Force Participation Rate decreased to 62.5% in November from 62.6% in October.

This is down from the post pandemic peak of 62.8%.

Demographics (retiring baby boomers) is pushing down the rate.

3) Question #3 for 2024: What will the unemployment rate be in December 2024?

"Depending on the estimate for the participation rate and job growth (next question), my guess is the unemployment rate will remain in the mid-to-high 3% range in December 2024. (Lower than the FOMC forecast of 4.0% to 4.2%)."

The unemployment rate was at 4.2% in November (The FOMC projections beat me on this one).

2) Question #2 for 2024: How much will job growth slow in 2024? Or will the economy lose jobs?

"So, my forecast is for gains of around 1.0 million to 1.5 million jobs in 2024. This would be another solid year for employment gains given current demographics."

This graph shows the jobs added per month since January 2021.

Job growth slowed from 3.0 million in 2023 but was still strong in 2024.

Through November the economy has added 1.98 million jobs in 2024, above my guess.

1) Question #1 for 2024: How much will the economy grow in 2024? Will there be a recession in 2024?

"The FOMC is expecting growth of 1.2% to 1.7% Q4-over-Q4 in 2024. ... My sense is growth will be sluggish in 2024, and the economy will avoid recession. ...

So, my guess is that real GDP growth will be positive in the 1% to 2% range in 2024.

I was correct about no recession, but growth will likely be closer to 2.5% or so in 2024.

For the most part, the economy evolved as expected in 2024. Economic (GDP) and employment growth outperformed my guesses.