by Calculated Risk on 1/06/2025 08:11:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Barely Budge to Start New Week

The bond market and interest rates have arrived at the first full week of the new year almost exactly where they left off before the X-mas/New Year holiday weeks. ... Although the past 2 weeks have been uneventful for rates, the next 2 weeks will be heavily influenced by incoming economic data. There are several honorable mentions over the next few days before getting to this week's headliner on Friday: the jobs report. [30 year fixed 7.10%]
emphasis added

Tuesday:
• At 8:30 AM ET, Trade Balance report for November from the Census Bureau. The consensus is the trade deficit to be $77.5 billion.  The U.S. trade deficit was at $73.8 billion in October.

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

• Also at 10:00 AM, the ISM Services Index for December.

by Calculated Risk on 1/06/2025 04:55:00 PM

Note: I covered apartments and offices in the newsletter: Moody's: Apartment Vacancy Rate Increased in Q4; Office Vacancy Rate at Record High

From Moody’s Analytics economists: Multifamily Continued to Defy the Supply Shock, Office’s Vacancy Rate Broke Another Record, Retail Rents Drift Higher with Tight Supply, And Industrial Maintains Status Quo

The retail vacancy rate remained stable at 10.3% in Q4, putting a pause to a one-time decline in the previous quarter. Both asking and effective rent enjoyed a slight increase of 0.3%, reaching $21.90 and $19.19/sqft respectively. This steady performance fit in with the backdrop of retail sales exceeding expectations again in the fourth quarter, with October and November witnessing 0.5% and 0.7% growth respectively. Although these gains were primarily driven by purchases of motor vehicles and online merchandise, this surge in consumer spending reflected the resilience of the labor market, robust household finances, accompanied by Federal Reserve interest rate cuts and a slowdown in inflation, which together bolstered consumer confidence.

This graph shows the strip mall vacancy rate starting in 1980 (prior to 2000 the data is annual). 

Moody's reports the strip mall vacancy rates was 10.3% in Q4, down slightly from 10.4% in Q4 2023.

Back in the '80s, there was overbuilding in the mall sector even as the vacancy rate was rising. This was due to the very loose commercial lending that led to the S&L crisis.

In the mid-'00s, mall investment picked up as mall builders followed the "roof tops" of the residential boom (more loose lending). This led to the vacancy rate moving higher even before the recession started. Then there was a sharp increase in the vacancy rate during the recession and financial crisis.

Recently the vacancy rate has held fairly steady at a high level as online shopping continues to impact brick and mortar stores.

by Calculated Risk on 1/06/2025 01:55:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the December 2024 seasonally adjusted annual sales rate (SAAR) of 422 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 422 thousand SAAR in December, down from 491 thousand in November, and down 9.5% from 466 thousand SAAR in December 2023.  

Usually, heavy truck sales decline sharply prior to a recession.  This is just one month, and sales might be revised up.

Meanwhile, as I mentioned on Friday, light vehicle sales increased in December.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.  

Vehicle sales were at 16.80 million SAAR in December, up from 16.65 million in November, and up 5.5% from 15.92 million in December 2023.

by Calculated Risk on 1/06/2025 11:07:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Moody's: Apartment Vacancy Rate Increased in Q4; Office Vacancy Rate at Record High

A brief excerpt:

From Moody’s Analytics Economists: Multifamily Continued to Defy the Supply Shock, Office’s Vacancy Rate Broke Another Record, Retail Rents Drift Higher with Tight Supply, And Industrial Maintains Status Quo

Amid record-level inventory growth, average vacancy rate edged up 10 bps in each of the last two quarters and finished 2024 at 6.1%, 40 bps higher than the same time last year and the highest level on record since 2011.

Moody’s Analytics (formerly Reis) reported that the apartment vacancy rate was at 6.1% in Q4 2024, up from an upwardly revised 6.0% in Q3, and up from the pandemic peak of 5.6% in Q1 2021. This is the highest vacancy rate since 2011. Note that asking rents are flat year-over-year. 

This graph shows the apartment vacancy rate starting in 1980. (Annual rate before 1999, quarterly starting in 1999). Note: Moody’s Analytics is just for large cities.

There is much more in the article.

by Calculated Risk on 1/06/2025 08:11:00 AM

Altos reports that active single-family inventory was down 2.4% week-over-week.

Inventory will continue to decline seasonally and probably bottom in late 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 27.3% compared to the same week in 2023 (last week it was up 26.8%), and down 22.2% compared to the same week in 2019 (last week it was down 16.8%). 

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 Jan 3rd, inventory was at 635 thousand (7-day average), compared to 651 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 1/05/2025 08:04:00 PM

Weekend:
• Schedule for Week of January 5, 2025

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

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

Monday:
• No major economic releases scheduled.

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

Oil prices were up over the last week with WTI futures at $73.99 per barrel and Brent at $76.46 per barrel. A year ago, WTI was at $74, and Brent was at $78 - so WTI oil prices are unchanged 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 $3.06 per gallon, so gasoline prices are down $0.03 year-over-year.

by Calculated Risk on 1/05/2025 12:39:00 PM

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.

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?

A year ago, I argued that "the economy will avoid recession" in 2024, and that a soft landing was the likely outcome.  Looking at 2025, a recession is mostly off the table.  Of course there are always exogenous events such as another pandemic, super volcanoes, a major meteor strike or even nuclear war.  There are several geopolitical issues that could lead to recession - in Ukraine, the Middle East, and with China.   However, none of those risks appear likely to cause a U.S. recession this year.

Here is a table of the annual change in real GDP since 2005.  Prior to the pandemic, economic activity was mostly in the 2%+ range since 2010.  Given current demographics, that is about what we'd expect: See: 2% is the new 4%..

Note: This table includes both annual change and Q4 over the previous Q4 (two slightly different measures).   For 2024, I used a 2.6% growth rate Q4 over Q4.  (this gives 2.8% real annual growth).  

Real GDP Growth
Year	Annual GDP	Q4 / Q4
2005	3.5%	3.0%
2006	2.8%	2.6%
2007	2.0%	2.1%
2008	0.1%	-2.5%
2009	-2.6%	0.1%
2010	2.7%	2.8%
2011	1.6%	1.5%
2012	2.3%	1.6%
2013	2.1%	3.0%
2014	2.5%	2.7%
2015	2.9%	2.1%
2016	1.8%	2.2%
2017	2.5%	3.0%
2018	3.0%	2.1%
2019	2.6%	3.4%
2020	-2.2%	-1.0%
2021	6.1%	5.7%
2022	2.5%	1.3%
2023	2.9%	3.2%
20241	2.8%	2.6%
1 2024 estimate based on 2.8% Q4 SAAR annualized real growth rate.

  

Real GDP growth is a combination of labor force growth and productivity.  

Productivity varies and is difficult to predict, but the labor force growth will likely be sluggish in 2025.  So, my guess is that real annual GDP growth will be less than most expect, perhaps around 1.5% in 2025.

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 1/05/2025 10:27:00 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.

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?

For review, here is a table of the annual change in total nonfarm, private and public sector payrolls jobs since 1997.  

Change in Payroll Jobs per Year (000s)
	Total, Nonfarm	Private	Public
1997	3,406	3,211	195
1998	3,047	2,734	313
1999	3,183	2,722	461
2000	1,937	1,673	264
2001	-1,734	-2,285	551
2002	-515	-748	233
2003	125	167	-42
2004	2,039	1,892	147
2005	2,527	2,341	186
2006	2,091	1,882	209
2007	1,145	857	288
2008	-3,548	-3,728	180
2009	-5,041	-4,967	-74
2010	1,029	1,245	-216
2011	2,066	2,378	-312
2012	2,172	2,239	-67
2013	2,293	2,360	-67
2014	2,999	2,872	127
2015	2,717	2,567	150
2016	2,327	2,120	207
2017	2,111	2,031	80
2018	2,283	2,156	127
2019	1,988	1,773	215
2020	-9,274	-8,224	-1,050
2021	7,245	6,853	392
2022	4,528	4,229	299
2023	3,013	2,304	709
2024	2,2741	1,7841	4901
112 Month Change Ending in November.

The good news is job market still has momentum heading into 2025.

Click on graph for larger image.

The bad news - for job growth - is that the labor force will grow slowly in 2025!

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

There was strong job growth in 2021 and 2022 as the economy bounced back from the pandemic recession.

Job growth slowed in 2023 but was still historically strong.  Job growth slowed further in 2024 but was still solid.

It appears that population growth will slow to around 1.2 million in 2025 (births minus deaths plus net immigration) and the overall participation rate will decline due to demographics.  That suggests that labor force will grow slowly or might even contract.  That is why I think the unemployment rate will decline.

So, my forecast is for gains of around 1.0 million jobs in 2025.  This will probably be the slowest job growth since 2010 (excluding the 2020 pandemic job losses).  

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 1/04/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Case-Shiller: National House Price Index Up 3.6% year-over-year in October

• Final Look at Local Housing Markets in November and a Look Ahead to December Sales

• Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in November

• Freddie Mac House Price Index Increased in November; Up 4.0% Year-over-year

• Inflation Adjusted House Prices 1.3% Below 2022 Peak

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

by Calculated Risk on 1/04/2025 08:11:00 AM

The key report this week is the December employment report on Friday.

Other key indicators include the November Trade Deficit and November Job Openings.

----- Monday, January 6th -----
No major economic releases scheduled.

----- Tuesday, January 7th -----
8:30 AM: Trade Balance report for November from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $77.5 billion.  The U.S. trade deficit was at $73.8 billion in October.

10:00 AM ET: Job Openings and Labor Turnover Survey for November from the BLS.

This graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings increased in October to 7.74 million from 7.37 million in September.

10:00 AM: the ISM Services Index for December.

----- Wednesday, January 8th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release two weeks of results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for December. This report is for private payrolls only (no government). The consensus is for 143,000, down from 146,000 jobs added in November.

----- Thursday, January 9th -----
The US NYSE and the NASDAQ will be closed in observance of a National Day of Mourning for former President Jimmy Carter.

6:00 AM: NFIB Small Business Optimism Index for December.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for a decrease to 210 thousand from 211 thousand last week.

----- Friday, January 10th -----
8:30 AM: Employment Report for December.   The consensus is for 160,000 jobs added, and for the unemployment rate to be unchanged at 4.2%.

There were 227,000 jobs added in November, and the unemployment rate was at 4.2%.

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

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for January)