The Housing Chronicles Blog: 11/1/17 - 12/1/17

Monday, November 20, 2017

U.S. Coincident and Lagging Economic Indices both rose moderately in October

The Conference Board Coincident Economic Index® (CEI) for the U.S. increased 0.3 percent in October following a 0.1 percent increase in September, and no change in August.

The Conference Board Lagging Economic Index® (LAG) for the U.S. increased 0.2 percent in October, following no change in September, and a 0.2 percent increase in August.


Leading Economic Index grew by a strong 1.2 percent in October

The US LEI increased sharply in October, as the impact of the hurricanes dissipated. The growth of the LEI, coupled with widespread strengths among its components, suggests that solid growth in the US economy will continue through the holiday season and into the new year.


Friday, November 17, 2017

3Q 2017 online retail sales up 15.5 percent year-on-year vs. 4.3. percent for all retail

After being adjusted for seasonal variations, U.S. retail e-commerce sales for the third quarter of 2017 were $115.3 billion, an increase of 3.6 percent from the previous quarter and 15.5 percent year-on-year.

Total retail sales for the third quarter of 2017 were estimated at $1,268.9 billion, an increase of 1.1 percent from the previous quarter and 4.3 percent year-on-year.

The share of e-commerce sales in the third quarter of 2017 accounted for 9.1 percent of total sales, up from 8.9 percent the previous quarter and 8.2 percent year-on-year.


October housing starts rebound 13.7 percent from September, down 2.9 percent year-on-year

Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,290,000. This is 13.7 percent above the revised September estimate of 1,135,000, but is 2.9 percent below the October 2016 rate of 1,328,000.


October building permits rebound 5.9 percent from September, up 0.9 percent year-on-year

Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,297,000. This is 5.9 percent above the revised September rate of 1,225,000 and is 0.9 percent above the October 2016 rate of 1,285,000.


Thursday, November 16, 2017

Initial unemployment claims rise by 10,000 in latest report

In the week ending November 11, initial unemployment claims were 249,000, an increase of 10,000 from the previous week's unrevised level of 239,000. The 4-week moving average was 237,750, an increase of 6,500 from the previous week's unrevised average of 231,250.


Mortgage applications up 3.1 percent in latest survey as rates remain flat

The Market Composite Index increased 3.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 0.4 percent and refinances rising 6.0 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.18 percent.


Bloomberg Consumer Comfort Index: Economic optimism rising to 3-month high in weekly survey

Optimism about the direction of the U.S. economy improved to a three-month high in November as sentiment remained supported by a robust job market and steady growth, with the Bloomberg Consumer Comfort Index rising to 52.1.


Axiometrics: October's 2.1 percent apartment rent growth flat from September as occupancy dipped to 94.7 percent

October's 2.1% annual effective rent growth was essentially the same as September's rate, but was 44 bps lower than the 2.6% of October 2016. The national occupancy rate declined by 16 bps to 94.7% in October, the lowest it has been since March, but that's nothing new in the post-recession period. Occupancy has declined from 13-24 bps from September to October in each of the past eight years.


Industrial production up 0.9 percent in October and 2.9 percent year-on-year

Industrial production rose 0.9 percent in October, and manufacturing increased 1.3 percent. Total industrial production has risen 2.9 percent over the past 12 months; output in October was 106.1 percent of its 2012 average. Capacity utilization for the industrial sector was 77.0 percent, a rate that is 2.9 percentage points below its long-run (1972-2016) average.


November builder confidence rose two points to 70, second-highest level since mid-2005

Builder confidence in the market for newly-built single-family homes rose two points to a level of 70 in November on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This was the highest report since March, and the second highest on record since July 2005.


Wednesday, November 15, 2017

Gallup: Well-Being Index drops in 2017 to levels last seen in 2014

Overall well-being among U.S. adults has declined substantially this year. The Gallup-Sharecare Well-Being Index score so far in 2017 is 61.5, down 0.6 points from 62.1 in 2016 and on par with the lower level recorded in 2014. This decline is both statistically significant and meaningfully large. 

This year marks a reversal of the three-year upward trend, with minorities, women, low-income adults and Democrats bearing the brunt of the decline.  Within those groups, emotional and psychological metrics were the primary source of the drop.


Gallup: 4Q 2017 Small Business Index dips slightly after 10-year high in July

U.S. small-business owners continue to display optimism about business conditions in the fourth quarter of 2017, according to the latest Wells Fargo/Gallup Small Business Index survey. In the quarterly survey, which measures small-business owners' attitudes about a wide variety of factors affecting their businesses, the overall index score has declined slightly to +103, after hitting a 10-year high of +106 in July.


Gallup: U.S. Economic Confidence Index holds at highest level since mid-August

Americans' confidence in the economy was steady last week, holding at the highest level since mid-August and one of the highest levels in the past nine years. Gallup's U.S. Economic Confidence Index averaged +7 for the week ending Nov. 12.


November Empire State Manufacturing Survey down from October but still firmly in positive territory

Business activity continued to grow strongly in New York State, according to firms responding to the November 2017 Empire State Manufacturing Survey. Though the headline general business conditions index fell eleven points from the multiyear high it reached last month, it remained firmly in positive territory at 19.4. Indexes assessing the six-month outlook suggested that firms were very optimistic about future business conditions.

November business inflation expectations rise to 2.0 percent over next year

In the November survey:
  • Inflation expectations: Firms' inflation expectations increased to 2.0 percent over the year ahead.
  • Current economic environment: Sales levels improved somewhat, and profit margins were roughly unchanged over the month.
  • Quarterly question: Sixty-one percent of respondents expect labor costs to put upward pressure on prices over the year ahead. Fifty-six percent of respondents expect nonlabor costs to put upward pressure on prices over the year ahead. The majority of firms expect sales levels, productivity, and margin adjustments to have little or no influence on prices over the year ahead.

September business inventories flat but sales rose

Business inventories were flat in September followed a downwardly revised 0.6 percent increase in August. Inventories are a key component of gross domestic product and were previously reported to have risen 0.7 percent in August.  Sales were up 1.4 percent from August and 6.4 percent year-on-year.


October Consumer Price Index up 0.1 percent from September and 2.0 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.1 percent in October and was up 2.0 percent year-on-year. The index for all items less food and energy increased 0.2 percent in October and was up 1.8 percent year-on-year.


October retail sales up 0.1 percent from September and 4.3 percent year-on-year

Retail sales in October increased 0.1 percent over September on a seasonally adjusted basis and were up 4.3 percent year-over-year. The numbers exclude automobiles, gasoline stations and restaurants.


Tuesday, November 14, 2017

CoreLogic: August foreclosure inventory rate dips to lowest rate since August 2006

Nationally, 4.6 percent of mortgages were in some stage of delinquency (30 days or more past due including those in foreclosure) in August 2017. This represents a 0.6 percentage point year-over-year decline in the overall delinquency rate compared with August 2016 when it was 5.2 percent.

As of August 2017, the foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, was 0.6 percent, down from 0.9 percent in August 2016. This was the lowest foreclosure inventory rate for the month of August in 11 years since August 2006 when it was 0.5 percent.


October Small Business Optimism Index maintains high level set last November

More small business owners last month said they expect higher sales and think that now is a good time to expand, according to the October NFIB Index of Small Business Optimism. The October Index rose to 103.8, up from 103 the previous month. The historically strong performance extends the streak of positive months dating back to last November, when it shot up immediately following the election.


Producer Price Index up 0.4 percent in October, 12-month rise of 2.8 percent highest since February 2012

The Producer Price Index for final demand increased 0.4 percent in October, after rising 0.4 percent in September and 0.2 percent in August. On an unadjusted basis, the final demand index increased 2.8 percent for the 12 months ended in October, the largest rise since an advance of 2.8 percent for the 12 months ended February 2012.


Friday, November 10, 2017

2017 in Review: A Gradually Strengthening Economy Meets Higher Construction Costs

At this same time a year ago, I wrote about an economy that was improving enough that the Federal Reserve was about to raise interest rates for the second time since 2006, followed by up to three more hikes in 2017.  However, there has also been a consequence of this growth in the form of higher costs for land, labor and materials, making it challenging for builders to build the types of affordable housing at a time when new home starts are predicted to jump sharply in 2018.

U.S. GDP growth – which averaged about two percent in both 2015 and 2016 and was just 1.2 percent in 1Q 2017 ---- surged to three percent in the second and third quarters, due mostly to increased consumer spending, inventory investments, exports and federal government outlays.  Current forecasts are suggesting this rate of growth to improve even further to 3.3 percent in the final quarter of 2017.

Job growth, which rose by 261,000 in October, averaged 169,000 per month through the first ten months of 2017 (down 12.2 percent from the same period of 2016), and would likely have been higher without the negative impacts from a particularly harsh hurricane season.  Had job growth stayed on track with the average through August, job growth through October would have been closer to 185,000 jobs per month.  Moreover, October’s official unemployment rate of 4.1 percent is the lowest reported since December 2000.

Not surprisingly, consumer confidence from both The Conference Board and the University of Michigan surveys has risen to the highest levels since the early 2000s, boosted in large part by the strengthening job market.  In turn, wages have come under increasing pressure, with average hourly earnings up 2.2 percent for the 12 months ending in October.

Still, because the Federal Reserve-preferred PCE price index rose by just 1.6 percent per year through September, it’s not clear just how many interest rate increases we’ll see in 2018.  Complicating matters further are higher inflation indicators from both the Producer Price Index and Consumer Price Index, which rose by 2.6 and 2.2 percent per year through September, respectively.

Certainly one area in which we’ve seen higher inflation is in the cost for building a new single-family home, which as of September 2017 was up by 5.2 percent year-on-year and 29.2 percent over the previous five years.  Combine that increase with tight supply in most markets, and the result has been a decline in home affordability.

As of 3Q 2017, the NAHB/Wells Fargo Housing Opportunity Index fell to 58.3 percent, for the lowest rate since the same quarter of 2008, and down sharply from the last peak of 77.5 in 1Q 2012.  Since 3Q 2008, median national home prices tracked by the same report rose by 26 percent.

Single-family new home sales, which dipped in July and August, rebounded by nearly 19 percent in September to 667,000 per year, and were up 17 percent year-over-year.  So far in 2017, new home sales have averaged 609,000 per month, up nine percent from the same period of 2016.    At current sales rates, existing inventory would take 5.0 months to sell, down slightly from 5.1 a year ago.

For existing homes, lack of inventory at the lower end of the market and rising prices have recently stunted sales, with September’s pace down 1.5 percent from a year ago and the share of first-time buyers declining to 29 percent from 34 percent.

Although September’s inventory did rise slightly to 1.90 million homes – or a timeline of 4.2 months at current sales rates -- it has fallen year-over-year for 28 consecutive months. While pending home sales in September were flat from August, they were still down 3.5 percent from a year ago, and have fallen on an annual basis in five of the past six months.

Thankfully, there does seem to relief on the horizon.  Looking ahead to 2018, FreddieMac is predicting home builders to take up much of this slack in overall housing inventory.  Annualized housing starts, which averaged 1.19 million for the first nine months of 2017, are forecast to rise by another nine percent to 1.33 million in 2018, with total single-family home sales rising by about two percent to 6.30 million units even as mortgage rates trend slowly upward.

As for potential consequences of tax reform on the housing market, given the high level of push-back from multiple interest groups, and with the Senate and House versions still far apart as of mid-November, that analysis must wait for another day.

Consumer sentiment dips slightly in early November survey

Consumer sentiment declined slightly in early November due to widespread losses across current and expected economic conditions. The losses were quite small as the Sentiment Index remained at its second highest level since January. While the expected Fed rate hikes seem to be the right preemptive action, the critical issue is whether income gains will be sufficient to outweigh rate hikes in home and vehicle purchase decisions.


Thursday, November 9, 2017

Initial unemployment claims rise 10,000 in latest report, but 4-week average down 1,250

In the week ending November 4, initial unemployment claims were 239,000, an increase of 10,000 from the previous week's unrevised level of 229,000. The 4-week moving average was 231,250, a decrease of 1,250 from the previous week's unrevised average of 232,500. This is the lowest level for this average since March 31, 1973 when it was 227,750.


Mortgage applications mostly unchanged in latest report, rates dip slightly

The Market Composite Index remained unchanged on a seasonally adjusted basis from one week earlier, with purchase loans up 1.0 percent and refinancing down 1.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.18 percent from 4.22 percent.


Bloomberg Consumer Comfort Index remains at high levels in weekly update

The comfort index has advanced about six points since the start of the year and is also running above its 2017 average. Steady hiring, stock-market gains, home-price appreciation and contained inflation are helping to keep the measure in a range close to its 16-year high of 53.3, reached in August.


Wholesale inventories up 0.3 percent in September while sales rose 1.3 percent

Wholesale inventories increased a seasonally adjusted 0.3% in September from the prior month, while sales were up 1.3% from the revised August level. The ratio of inventories to sales fell to 1.27 in September from 1.32 a year earlier, the lowest level since the end of 2014.


Tuesday, November 7, 2017

September consumer credit use up 6.6 percent year-on-year

Consumer credit rose $20.8 billion in September and is up 6.6 percent year over year. While revolving and nonrevolving credit growth accelerated from August’s gain, nonrevolving credit continues to lead the charge, eclipsing the $1 trillion level.


JOLTS: Job openings up 0.5 percent in September while hires fell 2.7 percent

The number of job openings rose by 0.5 percent during September to 6.1, with hires falling 2.7 percent to 5.3 million and separations falling .6 percent to 5.2 million.

Gallup's U.S. Economic Confidence Index unchanged in October at +3

Americans' confidence in the U.S. economy tilted slightly positive in October, with Gallup's U.S. Economic Confidence Index at +3 for the month. Though the index's current reading is on the low end of what Gallup has measured for 2017 so far, it remains well above the mostly negative ratings recorded from 2008 to 2016.

CoreLogic: October home prices up 7 percent year-on-year, but 36 percent of 100 top metro areas over-valued

October home prices nationally were up 0.9 percent from September and by 7 percent year-on-year. Looking ahead, the CoreLogic HPI Forecast indicates that home prices will increase by 4.7 percent on a year-over-year basis from September 2017 to September 2018.

According to CoreLogic Market Condition Indicators (MCI) data, 36 percent of cities have an overvalued housing stock as of September 2017. Also, as of September, 28 percent of the top 100 metropolitan areas were undervalued and 36 percent were at value.


October Senior Loan Officer Survey shows easing standards in 3Q 2017

On balance, banks eased their standards and terms on commercial and industrial (C&I) loans and experienced weaker demand for such loans. Meanwhile, banks' standards on most categories of commercial real estate (CRE) loans remained basically unchanged, while demand for CRE loans reportedly weakened.

For loans to households, banks reported that their lending standards on all categories of residential real estate (RRE) loans either eased or remained basically unchanged over the third quarter on balance, and that demand for all categories of RRE loans weakened. In contrast, banks reportedly tightened their standards and terms on credit card and auto loans, while demand for these loans reportedly remained basically unchanged.


Friday, November 3, 2017

Factory orders rose strongly in September as manufacturing builds momentum

New orders for U.S.-made goods rose for a second straight month in September and orders for core capital goods were stronger than previously reported, suggesting manufacturing activity was gathering momentum. Factory goods orders increased 1.4 percent, and orders for non-defense capital goods excluding aircraft - seen as a measure of business spending plans - surged 1.7 percent. September's increase in these so-called core capital goods orders was the largest since July 2016.


October service sector index reaches highest level since August 2005

The NMI® registered 60.1 percent in October, which is 0.3 percentage point higher than the September reading of 59.8 percent. This is the highest NMI® reading since the index’s debut in 2008. The highest reading among pre-2008 composite index calculations is 61.3 percent in August 2005.

The non-manufacturing sector has reflected the third consecutive month of strong growth. Respondent comments continue to indicate a positive outlook for business conditions, and the economy as we begin the fourth quarter.


October job growth rebounded strongly from hurricanes, while unemployment sunk to a 17-year low

Total nonfarm payroll employment rose by 261,000 in October, which compares to just 18,000 in September and 124,000 during the same month of 2016.  The unemployment rate edged down to 4.1 percent, which is the lowest posted since December of 2000.  Employment in food services and drinking places increased sharply, mostly offsetting a decline in September that largely reflected the impact of Hurricanes Irma and Harvey. In October, job gains also occurred in professional and business services, manufacturing, and health care.


Thursday, November 2, 2017

President Trump nominates Jerome Powell as new Fed Chair

From the New York Times:

Most expect Mr. Powell to maintain the slow but steady approach that Ms. Yellen has taken in raising rates and unwinding the portfolio of assets that the Fed purchased to boost the economy after the 2008 financial crisis. Mr. Powell remains a centrist voice in the Fed’s internal debates, arguing for the Fed to end its stimulus campaign at a slow and steady pace. Over the last year, that has placed him solidly among the majority led by Ms. Yellen.

“Our view is Powell is the G.O.P. version of Yellen, with the added kicker of wanting to reduce regulation,” said Tom Porcelli, chief United States economist at RBC Capital Markets. He said Mr. Powell was “the easy choice if you want to maintain continuity.”


Initial unemployment claims dip 5,000 in latest report; 4-week average lowest since April 1973

In the week ending October 28, initial unemployment claims were 229,000, a decrease of 5,000 from the previous week's revised level. The 4-week moving average was 232,500, a decrease of 7,250 from the previous week's revised average. This is the lowest level for this average since April 7, 1973 when it was 232,250.


Mortgage applications fall 2.6 percent in latest survey as rates rise

The Market Composite Index decreased 2.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 1.0 percent and refinance activity down 5.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to its highest level since July 2017, 4.22 percent.


Labor productivity up 3.0 percent in 3Q 2017 and 1.5 percent year-on-year

Nonfarm business sector labor productivity increased 3.0 percent during the third quarter of 2017, as output increased 3.8 percent and hours worked increased 0.8 percent. From the third quarter of 2016 to the third quarter of 2017, productivity increased 1.5 percent, reflecting a 2.9-percent increase in output and a 1.4-percent increase in hours worked.


October 2017 Job Cut Report: 29,831 Cuts, Lowest 10-month Total Since 1997

U.S.-based employers announced 29,831 job cuts in October, down 3 percent from the same month last year. So far in 2017, employers have announced 25 percent fewer job cuts than they did in the same period last year. This is the lowest ten-month total since 1997, when 328,816 cuts were announced through October.


Wednesday, November 1, 2017

Online job vacancies rose 1.8 percent in October, 1.52 total unemployed for each new job

Online advertised vacancies increased 81,500 to 4,563,800 in October, according to The Conference Board Help Wanted OnLine (HWOL) Data Series released today. The September Supply/Demand rate stands at 1.52 unemployed for each advertised vacancy, with a total of 2.3 million more unemployed workers than the number of advertised vacancies. The number of unemployed was approximately 6.8 million in September.


October manufacturing sector index dips 2.1 points from September to 58.7

The October PMI® registered 58.7 percent, a decrease of 2.1 percentage points from the September reading of 60.8 percent. Comments from the panel reflect expanding business conditions, with new orders, production, employment, order backlogs and export orders all continuing to grow in October, supplier deliveries continuing to slow (improving) and inventories contracting during the period.


Fed opts to leave interest rates at current levels in latest meeting

In view of realized and expected labor market conditions and inflation, the Committee decided to maintain the target range for the federal funds rate at 1 to 1-1/4 percent. The stance of monetary policy remains accommodative, thereby supporting some further strengthening in labor market conditions and a sustained return to 2 percent inflation.


September construction spending rose 0.3 percent, but private construction fell 0.4 percent

September construction spending increased 0.3 percent from August to $1.22 trillion and was up 2.0 percent on a year-on-year basis, although that rise was due to public spending. Investment on private construction projects fell 0.4 percent, the third straight decline.


ADP: Private sector jobs grew by 235,000 in October

Private-sector employment increased by 235,000 from September to October, on a seasonally adjusted basis. This compares to 110,000 in September and just 62,000 in October of 2016.