by Calculated Risk on 1/23/2023 08:30:00 AM

Altos reports inventory was down 0.1% week-over-week. Usually inventory bottoms in February; in 2022, inventory bottomed in early March.  It is possible that inventory is already near a bottom for the year!

Here are the same week inventory changes for the last five years:

2023: -0.6K

2022: -6.8K 

2021: -8.2K

2020: +2.1K

2019: +10.3K

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of January 20th, inventory was at 472 thousand (7-day average), compared to 473 thousand the prior week.   

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

The red line is for 2023.  The black line is for 2019.  Note that inventory is up from the previous two years (the record low was in 2022), but still well below normal levels.

Inventory was up 70.5% compared to the same week in 2022, and down 42.8% compared to the same week in 2019. 

A key will be when inventory starts increasing in 2023 - so far inventory has essentially been flat for the first three weeks of 2023.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 1/22/2023 06:43:00 PM

Weekend:
• Schedule for Week of January 22, 2023

Monday:
• No major economic releases are 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 $81.64 per barrel and Brent at $87.63 per barrel. A year ago, WTI was at $85, and Brent was at $90 - so WTI oil prices are DOWN 5% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.41 per gallon. A year ago, prices were at $3.30 per gallon, so gasoline prices are up $0.11 per gallon year-over-year.

by Calculated Risk on 1/22/2023 09:24:00 AM

Earlier, in the CalculatedRisk Real Estate Newsletter on December existing home sales, NAR: Existing-Home Sales Decreased to 4.02 million SAAR in December, I mentioned that the median price was down more than normal seasonally.

Below is a table of the seasonal pattern over the last several years.

Seasonally prices typically peak in June (closed sales for contracts signed mostly in April and May).

And seasonally prices usually bottom the following January (contracts signed in November and December). I've included the decline from the peak for December for each year to compare to 2022.

	2018	2019	2020	2021	2022
Peak Month	June	June	Oct	June	June
December	-7.0%	-3.8%	-0.7%	-2.2%	-11.3%
January	-8.9%	-6.7%	-1.2%	-3.4%	N/A

In 2020, prices increased late into the year and only decline slightly seasonally (the start of the pandemic buying boom), and in 2021, median prices only declined about 3% from peak to bottom.

But the decline this year, 11.3% so far, is larger than in the pre-pandemic years. And we will probably see a further decline in January and maybe in February - putting median prices down year-over-year soon.

by Calculated Risk on 1/21/2023 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• NAR: Existing-Home Sales Decreased to 4.02 million SAAR in December Median Prices Down 11.3% from Peak in June 2022

• December Housing Starts: Record Number of Housing Units Under Construction

• 4th Look at Local Housing Markets in December California Home Sales down 44% YoY in December; Prices Down 2.8% YoY

• The Housing Bubble and Mortgage Debt as a Percent of GDP

• Homebuilder Price Cuts

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

You can subscribe at https://calculatedrisk.substack.com/

Most content is available for free (and no Ads), but please subscribe!

by Calculated Risk on 1/21/2023 08:11:00 AM

The key reports scheduled for this week are the advance estimate of Q4 GDP, December New Home sales and December Personal Income and Outlays.

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

----- Monday, January 23rd -----
No major economic releases are scheduled.

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

10:00 AM: State Employment and Unemployment (Monthly) for December 2022

----- Wednesday, January 25th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

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

----- Thursday, January 26th -----
8:30 AM: Gross Domestic Product, 4th quarter and Year 2022 (Advance estimate). The consensus is that real GDP increased 2.6% annualized in Q4.

8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 205 thousand initial claims, up from 190 thousand last week.

8:30 AM: Durable Goods Orders for December. The consensus is for a 2.6% increase in durable goods.

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

10:00 AM: New Home Sales for December 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 614 thousand SAAR, down from 640 thousand in November.

11:00 AM: the Kansas City Fed manufacturing survey for January. 

----- Friday, January 27th -----
8:30 AM ET: Personal Income and Outlays for December. The consensus is for a 0.2% increase in personal income, and for a 0.1% decrease in personal spending. And for the Core PCE price index to increase 0.3%.  PCE prices are expected to be up 5.0% YoY, and core PCE prices up 4.4% YoY.

10:00 AM: Pending Home Sales Index for December. The consensus is for a -1.0% decrease in the index.

10:00 AM: University of Michigan's Consumer sentiment index (Final for January). The consensus is for a reading of 64.6.

by Calculated Risk on 1/20/2023 09:17:00 PM

On COVID (focus on hospitalizations and deaths).  Data is now weekly.

Weekly deaths bottomed in July 2021 at 1,666.

COVID Metrics
	Now	Week Ago	Goal
New Cases per Week2	332,212	436,776	≤35,0001
Hospitalized2	33,405	39,413	≤3,0001
Deaths per Week2	3,953	4,209	≤3501
1my goals to stop weekly posts, 2Weekly for Cases, Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

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

January was the worst month for the previous two years, and this has seen a much smaller increase in deaths.

by Calculated Risk on 1/20/2023 04:16:00 PM

From CoStar: STR: Weekly US Hotel Occupancy Fails To Reach 55%, but Rates Stay High

U.S. hotel performance rose from the previous week and showed mixed comparisons against 2019, according to STR‘s latest data through Jan. 14.

Jan. 8-14, 2023 (percentage change from comparable week in 2019*):

• Occupancy: 54.8% (-5.5%)
• Average daily rate (ADR): $144.81 (+15.7%)
• Revenue per available room (RevPAR): $79.38 (+9.3%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019. Year-over-year comparisons will once again become standard after the first quarter.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2023, black is 2020, blue is the median, and dashed light blue is for 2022.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is below the median rate for the previous 20 years (Blue), but this is the slow season - and some of the early year weakness might be related to the timing of the report.

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

The 4-week average of the occupancy rate will increase seasonally over the next few months.

by Calculated Risk on 1/20/2023 12:47:00 PM

The preliminary estimate for Q4 real GDP growth will be released this coming Thursday, January 26th. The consensus estimate is for QoQ annualized real GDP growth of 2.6% in Q4.

From BofA:

Overall the data left our 4Q US GDP tracking estimate unchanged at 2.8% q/q saar, as the stronger contribution to growth from net trade in the tracking estimate offset the five-tenths decline in our tracking estimate for personal consumption. [Jan 20th estimate]
emphasis added

From Goldman:

We left our Q4 GDP tracking estimate unchanged at +2.6% (qoq ar). [Jan 10th estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2022 remains 3.5 percent on January 20. The nowcast was unchanged after rounding following this morning's report from the National Association of Realtors. [Jan 20th estimate]

by Calculated Risk on 1/20/2023 10:46:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: NAR: Existing-Home Sales Decreased to 4.02 million SAAR in December

Excerpt:

On prices, the NAR reported:

The median existing-home price for all housing types in December was $366,900, an increase of 2.3% from December 2021 ($358,800), as prices rose in all regions. This marks 130 consecutive months of year-over-year increases, the longest-running streak on record.

Median prices are distorted by the mix (repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices).

The YoY change in the median price peaked at 25.2% in May 2021 and has now slowed to 2.3%. The YoY increase in December was the lowest since May 2020. Note that the median price usually starts falling seasonally in July, so the 1.5% decline in December in the median price was partially seasonal, however the 11.3% decline in the median price over the last six months has been much larger than the usual seasonal decline.

It is likely the median price will be down year-over-year in a few months - and Case-Shiller will follow.

There is much more in the article.  You can subscribe at https://calculatedrisk.substack.com/ Please subscribe!

by Calculated Risk on 1/20/2023 10:11:00 AM

From the NAR: Existing-Home Sales Receded 1.5% in December

Existing-home sales retreated for the eleventh consecutive month in December, according to the National Association of Realtors®. Three of the four major U.S. regions recorded month-over-month drops, while sales in the West were unchanged. All regions experienced year-over-year declines.

Total existing-home sales, completed transactions that include single-family homes, townhomes, condominiums and co-ops – decreased 1.5% from November to a seasonally adjusted annual rate of 4.02 million in December. Year-over-year, sales sagged 34.0% (down from 6.09 million in December 2021).
...
Total housing inventory registered at the end of December was 970,000 units, which was down 13.4% from November but up 10.2% from one year ago (880,000). Unsold inventory sits at a 2.9-month supply at the current sales pace, down from 3.3 months in November but up from 1.7 months in December 2021.
emphasis added

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1993.

Sales in December (4.02 million SAAR) were down 1.5% from the previous month and were 34.0% below the December 2021 sales rate.

Sales were just above the pandemic low of 4.01 million SAAR.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory decreased to 0.97 million in December from 1.12 million in November.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory was up 10.2% year-over-year (blue) in December compared to December 2021.

Months of supply (red) decreased to 2.9 months in December from 3.3 months in November.

This was above the consensus forecast. I'll have more later. 

by Calculated Risk on 1/20/2023 09:14:00 AM

This morning BofA economists noted a possible shift in FOMC policy:

[O]ur baseline outlook for monetary policy includes 25bp rate hikes in February, March, and May of this year.

That said, if the Fed is comfortable downshifting to 25bp in February, it may be a signal that the committee is closer to terminal than it (and we) thought as recently as December. Recent trends in inflation look more favorable – and trends in economic activity look less favorable – than the median FOMC member projected in December. Should these trends continue, it could open the door for a pause in rate hikes as early as the March FOMC meeting (at a terminal of 4.75-5.0%). FOMC participants could justify this on account of risk management – pausing to assess the lagged effects of prior tightening – or from a real policy rate perspective. The December projections suggest the median member desires a real policy rate of around 150bp; an earlier pause to hikes would prevent monetary policy from becoming “too tight” as inflation falls. Again, this is not our baseline outlook, but, if history is any guide, turning points in the economy can be abrupt, and we cannot rule out an earlier end to policy rate tightening based on the November-December data flow.

This is close to my current view: Question #6 for 2023: What will the Fed Funds rate be in December 2023?

by Calculated Risk on 1/19/2023 08:36:00 PM

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

Friday:
• At 10:00 AM ET, Existing Home Sales for December from the National Association of Realtors (NAR). The consensus is for 3.95 million SAAR, down from 4.09 million.

by Calculated Risk on 1/19/2023 04:46:00 PM

This was written in 2014, but I never published it!

A short comment on "short memories" ...

Voters have "short memories". Sometimes "short memories" are good. Albert Schweitzer once said, "Happiness is nothing more than good health and a bad memory".

Many people think having a short memory is helpful in sports (not letting previous failures bother you) and in life (forgetting bad things and / not holding a grudge / letting go).

But for the economy and policy, short memories are a negative. There will be always be another generation of financial alchemists who think they can turn radioactive waste into gold.  And once again the riches will flow, until the economy suffers.  The next serious bubble and crash is coming, we just don't know when.

For policy, forgetting what actually happened (with the help of political spinners) is standard practice.  We'd actually have much better policy if voters had better memories, but unfortunately, they don't.   Politicians take advantage of this collective forgetfulness and act up in odd years - something everyone should be aware of as we head into 2015 (edit: now 2023) (I expect some episodes of DC craziness).

As far as the "debt ceiling", the "debt ceiling" sounds virtuous, when, in reality, the vote is about whether or not to the pay the bills - and not paying the bills is reckless and irresponsible.  The "debt ceiling" is redundant (once a budget or a continuing resolution is passed, then the impact on the debt is pretty much known).  This is like someone not paying their credit card bill to teach themselves not to use so much credit!  Irresponsible.

I prefer the term "default ceiling" because that is what it is.

best to all.

by Calculated Risk on 1/19/2023 03:30:00 PM

From Matthew Graham at Mortgage News Daily: Some BIG Changes to Mortgage Costs Were Just Announced

In a single moment, the fees for a vast majority of new mortgages in the US have changed. In some cases, the changes are drastic, both for better and worse. Let's break it down.

What do you mean by "fees/costs?"

This refers to Loan Level Price Adjustments (LLPAs) imposed by Fannie Mae and Freddie Mac (the "agencies"), the two entities that guaranty a vast majority of new mortgages. LLPAs are based on loan features such as your credit score, the loan-to-value ratio, occupancy (owner vs non-owner occupied homes), and most recently, your debt-to-income ratio

What lenders/loans does this apply to?

Any loan guaranteed by one of the agencies regardless of the lender. This is MOST loans in the US. Examples of loans that wouldn't be affected would be FHA/VA as well as certain jumbo and specialty products. "Non-conforming" loans are not impacted by this as they are not guaranteed by the agencies. A common example of a non-conforming loan would be a jumbo loan from a retail bank or credit union.

When does this take effect?

This applies to loans that are guaranteed by the agencies starting May 1st, 2023. That means many lenders will begin to implement the changes in March/April.

See Matt's article for a breakdown of what changed.

Here is the announcement from the FHFA: FHFA Announces Updates to the Enterprises’ Single-Family Pricing Framework. The changes are here.

by Calculated Risk on 1/19/2023 09:33:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: December Housing Starts: Record Number of Housing Units Under Construction

Excerpt:

Possibly Important: Multi-family permits averaged 536,000 SAAR over the last two months after averaging close to 650,000 SAAR over the previous 8 months. This decline in permits is a possible signal that the expected decline in multi-family starts has begun (although permits aren’t a perfect leading indicator for starts).
...
The fifth graph shows housing starts under construction, Seasonally Adjusted (SA).

Red is single family units. Currently there are 769 thousand single family units (red) under construction (SA). This was up slightly in December compared to November, but 59 thousand below the recent peak in April and May. Single family units under construction have peaked since single family starts are now declining. The reason there are so many homes under construction is probably due to supply constraints.

Blue is for 2+ units. Currently there are 943 thousand multi-family units under construction.  This is the highest level since December 1973! For multi-family, construction delays are probably also a factor. The completion of these units should help with rent pressure.

Combined, there are an all-time record 1.712 million units under construction.
...
The recent weakness has been mostly for single family starts; however, it appears the expected decline in multi-family starts has begun.

There is much more in the post.  You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 1/19/2023 08:41:00 AM

The DOL reported:

In the week ending January 14, the advance figure for seasonally adjusted initial claims was 190,000, a decrease of 15,000 from the previous week's unrevised level of 205,000. The 4-week moving average was 206,000, a decrease of 6,500 from the previous week's unrevised average of 212,500.
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 decreased to 206,000.

The previous week was unrevised.

Weekly claims were below the consensus forecast.

by Calculated Risk on 1/19/2023 08:37:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately‐owned housing starts in December were at a seasonally adjusted annual rate of 1,382,000. This is 1.4 percent below the revised November estimate of 1,401,000 and is 21.8 percent below the December 2021 rate of 1,768,000. Single‐family housing starts in December were at a rate of 909,000; this is 11.3 percent above the revised November figure of 817,000. The December rate for units in buildings with five units or more was 463,000.

An estimated 1,553,300 housing units were started in 2022. This is 3.0 percent below the 2021 figure of 1,601,000.

Building Permits:
Privately‐owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,330,000. This is 1.6 percent below the revised November rate of 1,351,000 and is 29.9 percent below the December 2021 rate of 1,896,000. Single‐family authorizations in December were at a rate of 730,000; this is 6.5 percent below the revised November figure of 781,000. Authorizations of units in buildings with five units or more were at a rate of 555,000 in December.

An estimated 1,649,400 housing units were authorized by building permits in 2022. This is 5.0 percent below the 2021 figure of 1,737,000.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts for the last several years.

Multi-family starts (blue, 2+ units) decreased in December compared to November.   Multi-family starts were down 14.9% year-over-year in December. 

Single-family starts (red) increased in December and were down 25.0% 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 in single-family starts.

Total housing starts in December were above expectations, however, starts in October and November were revised down, combined.

I'll have more later …

by Calculated Risk on 1/18/2023 09:02:00 PM

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

Thursday:
• At 8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 212 thousand initial claims, up from 205 thousand last week.

• At 8:30 AM: Housing Starts for December. The consensus is for 1.358 million SAAR, down from 1.427 million SAAR.

• At 8:30 AM: the Philly Fed manufacturing survey for January.

by Calculated Risk on 1/18/2023 03:59:00 PM

Today, in the Calculated Risk Real Estate Newsletter: 4th Look at Local Housing Markets in December

A brief excerpt:

This is the fourth look at local markets in December. I’m tracking about 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.
...
Here is the press release from the California Association of Realtors® (C.A.R.): Interest rate reprieve bolsters December home sales, C.A.R. reports

• Existing, single-family home sales totaled 240,330 in December on a seasonally adjusted annualized rate, up 1.1 percent from November and down 44.1 percent from December 2021.

• December’s statewide median home price was, $774,580 down 0.4% percent from November and down 2.8% percent from December 2021.

In December, sales were down 37.8%. In November, these same markets were down 38.1% YoY Not Seasonally Adjusted (NSA).

This is a similar YoY decline as in November for these markets. If national sales decline by the same percent as last month, the NAR will report sales for December under 4.0 million SAAR - below the 4.01 million in May 2020 (pandemic low) and the lowest sales rate since 2010.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 1/18/2023 03:17:00 PM

Fed's Beige Book "This report was prepared at the Federal Reserve Bank of Cleveland based on information collected on or before January 9, 2023."

Overall economic activity was relatively unchanged since the previous report. Five Districts reported slight or modest increases in overall activity, six noted no change or slight declines, and one cited a significant decline. On balance, contacts generally expected little growth in the months ahead. Consumer spending increased slightly, with some retailers reporting more robust sales over the holidays. Other retailers noted that high inflation continued to reduce consumers' purchasing power, particularly among low- and moderate-income households. Auto sales were flat on average, but some dealers noted that increased vehicle availability had boosted sales. Tourism contacts reported moderate to robust activity augmented by strong holiday travel. Manufacturers indicated that activity declined modestly on average, and, in many Districts, reported that supply chain disruptions had eased. Housing markets continued to weaken, with sales and construction declining across Districts. Commercial real estate activity slowed slightly, on average, with more notable weakening in the office market. Nonfinancial services firms experienced stable demand on balance. Most bankers reported that residential mortgage demand remained weak, and some said higher borrowing costs had begun to dampen commercial lending. Energy activity continued to increase moderately, and agriculture conditions were generally unchanged or improving.

Employment continued to grow at a modest to moderate pace for most Districts. Only one District reported a slight decline in employment, and one other reported no change in employment levels.
emphasis added

And some regional comments on apartments:

New York: A sizable volume of new apartment development is due to be completed in 2023.
...
St Louis: In November, month-over-month median rental rates on new leases fell in all four major District MSAs for both one- and two-bedroom apartments.
...
Dallas: Apartment leasing softened beyond seasonality, with occupancy and rents slipping modestly.