The Housing Chronicles Blog

Monday, January 22, 2018

Chicago Fed National Activity Index rose sharply in December

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved up to +0.27 in December from +0.11 in November.  The index's three-month moving average, CFNAI-MA3, ticked down to +0.42 in December from +0.43 in November.


Friday, January 19, 2018

January Empire State Manufacturing Survey shows declines from December

Economic growth continued in January, according to the firms responding to this month’s Manufacturing Business Outlook Survey. The broadest measures of current conditions remained positive this month, although indexes for general activity, new orders, and employment declined from their readings in December. The firms reported higher prices for both inputs and their own manufactured goods this month. The future indexes reflecting expected growth over the next six months remained at high levels, although the indexes fell from their readings in December.


Univ. of Michigan: Consumer sentiment dips in preliminary January survey

While the preliminary January reading for the Sentiment Index was largely unchanged from last month (-1.5%), consumers evaluated current economic conditions less favorably (-4.6%). This small decrease in current conditions produced a small overall decline. Importantly, the survey recorded persistent strength in personal finances and buying plans, while favorable levels of buying conditions for household durables have receded to preholiday levels in early January, largely due to less attractive pricing.


Thursday, January 18, 2018

Initial unemployment claims fall 41,000 to lowest level since early 1973

In the week ending January 13, initial unemployment claims were 220,000, a decrease of 41,000 from the previous week's unrevised level of 261,000. This is the lowest level for initial claims since February 24, 1973 when it was 218,000. The 4-week moving average was 244,500, a decrease of 6,250 from the previous week's unrevised average of 250,750.


Federal Reserve Beige Book: Texas rebounding sharply in latest summary

Reports from the 12 Federal Reserve Districts indicated that the economy continued to expand from late November through the end of the year, with 11 Districts reporting modest to moderate gains and Dallas recording a robust increase. Residential real estate activity remained constrained across the country. Most Districts reported little growth in home sales due to limited housing inventory. Nonresidential activity continued to experience slight growth.


Bloomberg: Consumer Comfort Index rises to highest level since March 2001

Americans grew more upbeat last week about the economy's performance and the buying climate, with the weekly comfort index rising to 53.8, the highest since March 2001.


December building permits flat from November, down 2.8 percent year-on-year

Privately-owned housing units authorized by building permits in December were at a seasonally adjusted annual rate of 1,302,000. This is 0.1 percent below the revised November rate of 1,303,000, but is 2.8 percent above the December 2016 rate of 1,266,000.


December housing starts dip 8.2 percent from November and 6.0 percent year-on-year

Privately-owned housing starts in December were at a seasonally adjusted annual rate of 1,192,000. This is 8.2 percent below the revised November estimate of 1,299,000 and is 6.0 percent below the December 2016 rate of 1,268,000.


Wednesday, January 17, 2018

Mortgage applications rise 4.1 percent, rates rise by 10 basis points

The Market Composite Index increased 4.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 3.0 percent and refinance activity rising 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to its highest level since March 2017, 4.33 percent.


Industrial production up 0.9 percent in December and 8.2 percent in 4Q 2017

Industrial production rose 0.9 percent in December even though manufacturing output only edged up 0.1 percent. For the fourth quarter as a whole, total industrial production jumped 8.2 percent at an annual rate after being held down in the third quarter by Hurricanes Harvey and Irma. At 107.5 percent of its 2012 average, the index has increased 3.6 percent since December 2016 for its largest calendar-year gain since 2010.


January builder confidence dips two points to 72 after previous month's 18-year high

Builder confidence in the market for newly-built single-family homes dropped two points to a level of 72 in January on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after reaching an 18-year high in December 2017.


Solutions to the Construction Labor Crisis

In general, it’s a great time to be working in the building industry.  Annualized single-family new home sales in November 2017 rose nearly 27 percent year-over-year to 733,000 units, while construction spending for the year rose to a record high of $1.26 trillion.  Annualized housing starts reached nearly 1.3 million by the end of 2017, for the highest level in over ten years, thus allowing the nation’s builders to start putting a greater dent in years of pent-up supply.

At this point in time, demand isn’t the issue.  The issue is supply -- specifically the supply of construction labor.

Although construction employment did rise by 210,000 jobs in 2017 to nearly seven million jobs (or an increase of about three percent over 2016 levels), that total is still down nine percent from the last peak in 2007.  Indeed, labor shortages remain as the most-cited concern in multiple building industry surveys, just as it has been noted regularly over the last several years.  That’s because while housing starts and construction spending rose by 106 and 67 percent since early 2011, respectively, construction employment has risen by just 29 percent.

The impact of this disconnect is growing.  According to a new report from the Associated General Contractors of America (AGC), half of surveyed companies are finding it difficult to fill positions in the field as well as in the office.  That challenge has also had an impact on the bottom line, with the cost index for homes under construction rising by 28 percent over the five-year period ending in November 2017.

Scott Sedam, President of TrueNorth Development, a consulting and training firm focused on home builders, has been sounding the alarm on labor shortages ever since the economic recovery began.  To help find solutions, Sedam’s team has developed its own LeanBuilder Group, which addresses various long-standing inefficiencies shared by builders so that all players in the supply chain can improve their productivity.  It’s also a great way to ensure that they obtain “most favored builder” status among critical suppliers and trade partners, even if that also means actively helping to develop those trades.

Still, part of the issue is related to culture.  In a recent NAHB survey, just three percent of those aged 18 to 25 were interested in construction careers.  Meanwhile, a 2017 Brookings Institution report showed that up to 20 percent of those working in construction were low-skilled immigrants, many replacing the 40 percent of jobs which had disappeared during the recession.

Consequently, solving the labor shortage will require not just more training, but also fast-tracking temporary work visas until the pent-up demand for construction workers has been met.  For its part, each year the NAHB’s non-profit Home Builders Institute (HBI) offers subsidized training to more than 3,000 underserved and at-risk youth and adults, ex-offenders and veterans, and the Skilled Labor Fund is actively raising $5 million to focus on training in residential construction.

The hope is that a combination of high school and post-secondary vocational education, employer training and programs similar to HBI’s will interest students in a career that can offer both high starting wages and upward mobility.

Yet sometimes solutions also come from unexpected places.

In the summer of 1993, when a Catholic nun in Santa Ana, California was living next door to a gunshot victim of gang violence – the second in the same family – she resolved to “look for what is broken in our world and heal that.”

Two years later, armed with substantial backing, a hands-on Board of Directors and the brand name of the Sisters of St. Joseph’s of Orange, Sister Eileen McNerney’s Hope Builders opened its doors to the first of nearly 5,550 at-risk youth who have graduated training in the fields of construction, healthcare and business.

Sister Eileen was strategic from the start, focusing in on those aged 18 to 25 because, as she notes, “those were the last years someone else could influence me.” With an average wage increase of 140 percent, 91 percent of program graduates going through the intensive, 16-week program have found jobs with the likes of Clark Builders, Hensel-Phelps and Lennar.

However, Hope Builders graduates also finish with more than new work skills.  “When young people have a criminal record, it’s hard to get them employed,” added Sister Eileen. “The only industry which is that forgiving is construction.  After three or four weeks of training, they’d get their new tool belt, which gave them lots of confidence.”

She paused for a moment.  “It made them more macho.”

It also soon helped to build more houses.

Tuesday, January 16, 2018

January Empire State Manufacturing Survey mostly unchanged from previous month

Business activity continued to grow at a solid clip in New York State, according to firms responding to the January 2018 Empire State Manufacturing Survey. The headline general business conditions index was little changed from last month's level.


Friday, January 12, 2018

November business inventories rose 0.4 percent vs. 1.2 percent increase in sales

Business inventories in the U.S. rose 0.4% in November after no change in the prior month, while sales jumped 1.2%. The ratio of inventories to sales, meanwhile, fell to 1.33 from 1.34. One year ago, the inventory-to-sales ratio was higher at 1.40, reflecting an excessive buildup in production not matched by sales. Now companies appear to have a better handle on inventories.


Retail sales grew 4.2 percent in 2017, highest growth rate since 2014

U.S. retail sales rose 0.4% in December, following a 0.9% increase in November. The results mean retail sales grew 4.2% in 2017, the most since 2014.