by Calculated Risk on 10/20/2024 09:50:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Update on the “Neutral” Rate and Early Read on September Existing Home Sales

A brief excerpt:

From housing economist Tom Lawler:

Early Read on Existing Home Sales in September

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 3.83 million in September, down 0.8% from August’s preliminary pace and down 3.8% from last September’s seasonally adjusted pace.

Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 3.9% from a year earlier.

CR Note on September sales: The National Association of Realtors (NAR) is scheduled to release September Existing Home Sales on Wednesday, October 23rd at 10 AM ET. The consensus is for 3.89 million SAAR, up from 3.86 million in August. The cycle low was 3.85 million SAAR in October 2023.

Update on the “Neutral” Rate

Executive Summary: Estimates of the “neutral” real interest rate are all over the map.  Based on an assessment of various measures, my best is that the neutral real interest rate in the US is between 1 ¾% to 2%.  One of course needs to add inflation/inflation expectations to that range.  If/when the Fed were to achieve its 2% inflation target, then the neutral nominal interest rate would be 3 ¾% to 4%.

There is much more in the article.

by Calculated Risk on 10/19/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Housing Starts Decreased to 1.354 million Annual Rate in September

• Part 2: Current State of the Housing Market; Overview for mid-October 2024

• 3rd Look at Local Housing Markets in September

• Lawler: Changes in Various Interest Rates Since the FOMC Cut Its Target Fed Funds Rate by 50 Basis Points

• 2nd Look at Local Housing Markets in September

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

by Calculated Risk on 10/19/2024 08:11:00 AM

The key economic reports this week are September New and Existing Home sales.

For manufacturing, the Richmond and Kansas City Fed manufacturing surveys will be released this week.

----- Monday, October 21st -----
No major economic releases scheduled.

----- Tuesday, October 22nd -----
10:00 AM: Richmond Fed Survey of Manufacturing Activity for October.

10:00 AM: State Employment and Unemployment (Monthly) for September 2024

----- Wednesday, October 23rd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Existing Home Sales for September from the National Association of Realtors (NAR). The consensus is for 3.89 million SAAR, up from 3.86 million in August.

The graph shows existing home sales from 1994 through the report last month.

During the day: The AIA/Deltek's Architecture Billings Index for September (a leading indicator for commercial real estate).

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, October 24th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 247 thousand initial claims, up from 241 thousand last week.

8:30 AM ET: Chicago Fed National Activity Index for September. This is a composite index of other data.

10:00 AM: New Home Sales for September 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 710 thousand SAAR, down from 716 thousand in August.

11:00 AM: Kansas City Fed Survey of Manufacturing Activity for October.

----- Friday, October 25th -----
10:00 AM: University of Michigan's Consumer sentiment index (Final for October). The consensus is for a reading of 69.0.

by Calculated Risk on 10/18/2024 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	997	1,186	≤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.  

Weekly deaths are triple the low of 302 in early June but are now declining and will likely continue to decline based on wastewater sampling.

And here is a graph I'm following concerning COVID in wastewater as of October 10th:

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

COVID in wastewater is declining - less than double the lows of last May - suggesting weekly deaths will continue to decline.

by Calculated Risk on 10/18/2024 03:49:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12-month average.

Click on graph for larger image.

On a rolling 12-month basis, inbound traffic increased 1.2% in September compared to the rolling 12 months ending in August.   Outbound traffic decreased 0.7% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in the Winter depending on the timing of the Chinese New Year.  

Imports were up 14% YoY in September, and exports were down 9% YoY.    

This was a very strong August and September for imports as retailers prepare for holiday shopping - and possibly to beat any increase in tariffs. 

It is also possible some importers shifted traffic to the West Coast ports to avoid the possible strike (now settled).

by Calculated Risk on 10/18/2024 12:54:00 PM

From BofA:

Since our last weekly publication, our 3Q GDP tracking estimate increased by four-tenths to 3.0% q/q saar. [Oct 18th estimate]
emphasis added

From Goldman:

On net, we lowered our Q3 GDP tracking estimate by 0.1pp to +3.1% (quarter-over-quarter annualized). [Oct 17th estimate]

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 3.4 percent on October 18, unchanged from October 17 after rounding. After this morning's housing starts report from the US Census Bureau, the nowcast of third-quarter real residential investment growth increased from -10.1 percent to -9.8 percent. [Oct 18th estimate]

by Calculated Risk on 10/18/2024 09:10:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.354 million Annual Rate in September

A brief excerpt:

Total housing starts in September were slightly above expectations and starts in July and August were revised up. A solid report.

The third graph shows the month-to-month comparison for total starts between 2023 (blue) and 2024 (red).

Total starts were down 0.7% in September compared to September 2023.  The YoY decrease in September total starts was due weakness in multi-family starts.

Single family starts have been up year-over-year in 13 of the last 15 months, whereas multi-family has been up year-over-year in only 1 of last 15 months. Year-to-date (YTD), total starts are down 3.4% compared to the same period in 2023. Single family starts are up 10.1% YTD, and multi-family down 30.6% YTD.

There is much more in the article.

by Calculated Risk on 10/18/2024 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,354,000. This is 0.5 percent below the revised August estimate of 1,361,000 and is 0.7 percent below the September 2023 rate of 1,363,000. Single-family housing starts in September were at a rate of 1,027,000; this is 2.7 percent above the revised August figure of 1,000,000. The September rate for units in buildings with five units or more was 317,000.

Building Permits:
Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,428,000. This is 2.9 percent below the revised August rate of 1,470,000 and is 5.7 percent below the September 2023 rate of 1,515,000. Single-family authorizations in September were at a rate of 970,000; this is 0.3 percent above the revised August figure of 967,000. Authorizations of units in buildings with five units or more were at a rate of 398,000 in September.
emphasis added

Click on graph for larger image.

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

Multi-family starts (blue, 2+ units) decreased in September compared to August.   Multi-family starts were down 16.2% year-over-year.

Single-family starts (red) increased in September and were up 5.5% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery - and the recent collapse and recovery in single-family starts.

Total housing starts in September were slightly above expectations and starts in July and August were revised up.  

I'll have more later …

by Calculated Risk on 10/17/2024 07:51:00 PM

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

Thursday:
• At 8:30 AM ET, Housing Starts for September. The consensus is for 1.350 million SAAR, down from 1.356 million SAAR.

by Calculated Risk on 10/17/2024 04:01:00 PM

Earlier from the Fed: Industrial Production and Capacity Utilization

Industrial production (IP) decreased 0.3 percent in September after advancing 0.3 percent in August. A strike at a major producer of civilian aircraft held down total IP growth by an estimated 0.3 percent in September, and the effects of two hurricanes subtracted an estimated 0.3 percent. For the third quarter as a whole, industrial production declined at an annual rate of 0.6 percent. Manufacturing output moved down 0.4 percent in September, and the index for mining fell 0.6 percent. The index for utilities gained 0.7 percent. At 102.6 percent of its 2017 average, total industrial production in September was 0.6 percent below its year-earlier level. Capacity utilization edged down to 77.5 percent in September, a rate that is 2.2 percentage points below its long-run (1972–2023) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 77.5% is 2.2% below the average from 1972 to 2022.  This was below consensus expectations.

Note: y-axis doesn't start at zero to better show the change.

The second graph shows industrial production since 1967.

Industrial production decreased to 102.6. This is above the pre-pandemic level.

Industrial production was below consensus expectations.