by Calculated Risk on 12/27/2024 10:40:00 AM

From Goldman:

We lowered our Q4 GDP tracking estimate by 0.1pp to +2.3% (quarter-over-quarter annualized). Our Q4 domestic final sales forecast stands at +2.3% (quarter-over-quarter annualized). [Dec 27th estimate]
emphasis added

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2024 is 3.1 percent on December 24, unchanged from December 20 after rounding. After both the advance durable manufacturing report and the new home sales release from the US Census Bureau, the nowcast of fourth-quarter real gross private domestic investment growth increased from 1.2 percent to 1.3 percent. [Dec 24th estimate]

Weekly Schedule

by Calculated Risk on 12/27/2024 08:11:00 AM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

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

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?

The most followed wage indicator is the “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report.

Click on graph for larger image.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  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.

Real wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.0% YoY in November 2024. Although wage growth was above expectations in November, the trend is clearly down.

There are two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. All three data series are different, and most of the focus recently has been the CES series (used in the graph above).

The second graph is from the Atlanta Fed Wage Tracker.   This measure is the year-over-year change in nominal wages for individuals.

By following wage changes for individuals, this removes the demographic composition effects (older workers who are retiring tend to be higher paid, and younger workers just entering the workforce tend to be lower paid).

The Atlanta Fed Wage tracker showed nominal wage growth increased sharply in 2021 and for most of 2022.   In November 2024, the smoothed 3-month average wage growth was at 4.3% year-over-year, down from a peak of 6.7% in July 2022.

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 mid-to-high 3% range YoY in 2025 according to the CES.  Update 1/1/2025: It is possible that wage growth will increase with a falling participation rate and slower population growth. 

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 12/26/2024 05:02:00 PM

Today, in the CalculatedRisk Real Estate Newsletter: Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts and predictions for each question.

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

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?
...
Here is a table showing single and multi-family housing starts and new home sales since 2000. Note that single family starts, and new home sales declined sharply for several years following the housing bubble. The dynamics in this cycle are very different, and there will not be significant distressed sales in this cycle. Also new home sales were not as elevated prior to the downturn, so the decline wasn’t as sharp.

The decline in single-family starts and new home sales was not as severe or persistent as during the housing bust. Multi-family starts have been down significantly for two straight years.

There is much more in the post.

by Calculated Risk on 12/26/2024 09:39:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: Question #9 for 2025: What will happen with house prices in 2025?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts and predictions for each question.

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

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?
...
The following graph shows the year-over-year change through September 2024, in the seasonally adjusted Case-Shiller Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Case-Shiller Home Price Indices for "September" is a 3-month average of July, August and September closing prices. September closing prices include some contracts signed in May, so there is a significant lag to this data.

The Composite 10 SA was up 5.2% year-over-year in September. The Composite 20 SA was up 4.6% year-over-year. The National index SA was up 3.9% year-over-year. All were at new all-time highs in September.
...
Supply and demand are the keys for house prices; however, national house prices will mask some regional differences. We are seeing significant regional differences in supply at the end of 2024, with inventory increasing sharply in Florida and parts of Texas (and some other areas).

There is much more in the post.

by Calculated Risk on 12/26/2024 08:30:00 AM

The DOL reported:

In the week ending December 21, the advance figure for seasonally adjusted initial claims was 219,000, a decrease of 1,000 from the previous week's unrevised level of 220,000. The 4-week moving average was 226,500, an increase of 1,000 from the previous week's unrevised average of 225,500.
emphasis added

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 increased to 226,500.

The previous week was unrevised.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 12/25/2024 07:23:00 PM

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

Mortgage rates as of Monday (a little lower on Tuesday).

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. Initial claims were at 220 thousand last week.

by Calculated Risk on 12/25/2024 08:11:00 AM

Here is a High Sierra webcam (it is snowing!)

And the beach in Newport.

Best Wishes to All!

by Calculated Risk on 12/24/2024 04:01:00 PM

From housing economist Tom Lawler:

Since September 17th the Federal Reserve has lowered its federal funds rate range by 100 basis points. Below is a table showing Treasury and MBS rates since September 17th.

Click on graph for larger image.

Ho, Ho, Ho!!!! Happy Holidays!!!!

10-Year T1PS Yield

The chart below shows the monthly average 10-Year TIPS yield from December 2003 to December 2007 and then from January 2023 to December 2024 (December 2024 is the average to date). It excludes the financial crisis and the subsequent decade as well as the 2020-2022 Covid period.

From 2003 to 2007 the 10-year TIPS yield averaged 2.06%, about the same as the average so far in December 2024.

by Calculated Risk on 12/24/2024 12:46:00 PM

Today, in the CalculatedRisk Real Estate Newsletter: Lawler: New Census Population Estimates Show Massively Higher Population Growth

Excerpt:

From housing economist Tom Lawler: New Census Population Estimates Incorporate Revised Methodology for Estimating Net International Migration, Show Massively Higher Population Growth

Last week Census released its “Vintage 2024” estimates of the US resident population, and the new estimates show substantially faster population growth over the past few years than those shown in the “Vintage 2023” estimates. The reason, not surprisingly, is that Census updated its methodology to include estimates of what it refers to as “humanitarian” migrants, including border patrol releases and paroles. As many probably remember, last year the CBO issued a report suggesting that border patrol/other data indicated that net international migration over the past few years had been massively higher than official Census estimates had suggested. For more details on Census’ updated NIM methodology, see Census Bureau Improves Methodology to Better Estimate Increase in Net International Migration

Below are some tables comparing the Vintage 2024 population estimates with the Vintage 2023 population estimates.

Note: Each population “Vintage” includes projections of the resident population for the subsequent year. Thus, for Vintage 2023 the 2024 numbers are projections, and for Vintage 2024 the 2025 numbers are projections.

As this table shows, estimated population growth from July 1, 2021 to July 1, 2024 from Vintage 2024 is an eye-popping 3,386,610 higher than the Vintage 2023 estimate. Virtually all of this difference reflects higher estimates of net international migration in the Vintage 2024 estimates.

by Calculated Risk on 12/24/2024 09:16:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: Question #10 for 2025: Will inventory increase further in 2025?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts, and maybe some predictions for each question.

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

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?

First, a brief history. Here are a few times when watching existing home inventory helped my analysis.

Starting in January 2005, I was very bearish on housing, but I wasn’t sure when the market would turn. Speculative bubbles can go on and on. However, the increase in existing home inventory in late 2005 (see red arrow on graph below) helped me call the top for house prices in 2006.

Several years later, in early 2012, when many people were still bearish on housing, the plunge in inventory in 2011 (blue arrow on graph below) helped me call the bottom for house prices in early 2012 (see The Housing Bottom is Here).