The Housing Chronicles Blog: 12/1/17 - 1/1/18

Sunday, December 31, 2017

Happy New Year from Housing Chronicles!

Happy New Year from The Housing Chronicles Blog!

This year has been one of growth for this blog, helped in great part by deciding to curate and post links to economic news nearly every weekday.

In 2017, we had nearly 170,000 page views, or an average of 14,000 per month -- not bad for a small blog for niche readers.  Growth was strongest between the third and fourth quarters of the year, with page views up about 35 percent.

Please keep visiting this blog, and keep on the lookout for some new reports we'll be unveiling in 2018.

With a critical year for politics in 2018, and with all asset classes reaching to the sky, it will be important to keep a watchful eye on the many economic indicators which tell us what's going on at the national, state, and local levels.

Thursday, December 28, 2017

December Chicago Business Barometer rises to highest level since March 2011

The MNI Chicago Business Barometer rose to 67.6 in December, up from 63.9 in November, closing the year at the highest level since March 2011.


Initial unemployment claims unchanged in latest report

In the week ending December 23, initial unemployment claims were 245,000, unchanged from the previous week's unrevised level of 245,000. The 4-week moving average was 237,750, an increase of 1,750 from the previous week's unrevised average of 236,000. Claims taking procedures continue to be disrupted in the Virgin Islands. The claims taking process in Puerto Rico has still not returned to normal.


Bloomberg Consumer Comfort Index rebounds to highest level since September

The gain in confidence, the first in three weeks, shows Americans are upbeat about the economy as stocks rally, unemployment lingers near a 17-year low and property values increase. The gauge of sentiment about the economy is now at its second-highest level since 2001. What's more, Republican households were particularly optimistic about their financial situation following passage of the tax cut package.


Wednesday, December 27, 2017

December consumer confidence dips slightly from November's 17-year high

Consumer confidence retreated in December after reaching a 17-year high in November. The decline in confidence was fueled by a somewhat less optimistic outlook for business and job prospects in the coming months. Consumers' assessment of current conditions, however, improved moderately.


November Pending Home Sales Index up 0.2 percent from October and 0.8 percent year-on-year

The Pending Home Sales Index rose 0.2 percent to 109.5 in November from 109.3 in October. With last month's modest increase, the index remains at its highest reading since June (110.0), and is now 0.8 percent above a year ago.


Tuesday, December 26, 2017

State Street Global Investor Confidence Index slips 1.5 points in December

The Global Investor Confidence Index decreased to 94.8, down 1.5 points from November’s revised reading of 96.3. The fall in sentiment was driven by a 6.2 point drop in the North American ICI to 94.9 and a 2.8 point fall in the Asian ICI to 94.8. However, the European ICI rose 16 points to 96.9.


October Case-Shiller Index up 0.2 percent from September and 6.2 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 6.2% annual gain in October, up from 6.1% in the previous month. Before seasonal adjustment, the National Index, 10-City and 20-City Composites all posted a month-over-month gain of 0.2% in October.


Friday, December 22, 2017

November durable goods orders up 1.3 percent from October, but business investment slips after four monthly gains

Durable-goods orders rose 1.3% in November, and was powered by volatile civilian aircraft orders. Excluding transportation, orders fell 0.1% while business investment slipped 0.1% in November after four monthly gains. These orders have climbed 5.1% in the past year.


November personal spending up 0.6 percent vs. 0.3 percent for personal income, inflation still low

In November, personal income increased 0.3 percent, disposable personal income rose 0.4 percent and personal spending rose 0.6 percent. Personal savings was 2.9 percent in November, down from 3.2 percent in October.

The PCE price index, the inflation index favored by the Federal Reserve, increased 0.2 percent, and is up 1.8 percent year-on-year.  Excluding food and energy, the PCE price index increased 0.1 percent, and is up 1.5 percent year-on-year.


Consumer confidence dips slowly in December but still at elevated levels

Consumer confidence continued to slowly sink in December, with most of the decline among lower income households. The extent of the decline was minor, with the December figure just below the average for 2017 (95.9 versus 96.8). Indeed, the average in 2017 was the highest since 2000, and only during the long expansions of the 1960's and 1990's was confidence significantly higher. Tax reform was spontaneously mentioned by 29% of all respondents, with nearly an equal split between positive and negative impacts on economic prospects.


November new home sales jumped 17.5 percent from October and 26.6 percent year-on-year

Sales of new single-family houses in November 2017 were at a seasonally adjusted annual rate of 733,000, up 17.5 percent from October and 26.6 percent year-on-year.  The monthly increase is the highest in 25 years, whereas the total number of sales is the highest pace since 2007.

Thursday, December 21, 2017

National Activity Index shows moderating growth in November

The Chicago Fed National Activity Index (CFNAI) was +0.15 in November, down from +0.76 in October. The CFNAI is a weighted average of 85 existing monthly indicators of national economic activity including production and income; employment, unemployment, and hours; personal consumption and housing; and sales, orders, and inventories.


November Non-Employment Index at 7.9 percent vs. 4.1 percent official rate

The Hornstein-Kudlyak-Lange Non-Employment Index (NEI) was 7.9 percent in November 2017, unchanged from October. It has declined by 0.4 percentage points since November 2016. The NEI including workers who are part time for economic reasons (PTER) was 8.9 percent in November 2017, unchanged compared to the previous month. That index has declined by 0.6 percentage points since November 2016.


Initial unemployment claims rise 20,000 in latest report

In the week ending December 16, initial unemployment claims were 245,000, an increase of 20,000 from the previous week's unrevised level of 225,000. The 4-week moving average was 236,000, an increase of 1,250 from the previous week's unrevised average of 234,750.


Mortgage applications fall 4.9 percent in latest report

The Market Composite Index decreased 4.9 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 6 percent and refinances falling 3 percent.  The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.16 percent from 4.20 percent.


Bloomberg Consumer Comfort Index falls from 53 to 47 in December

Americans' outlook for the U.S. economy fell in December to match the weakest for the year and a weekly measure of confidence cooled to a two-month low, even as both gauges remain high by historical standards.


October FHFA House Price Index up 0.5 percent from September and 6.6 percent year-on-year

The FHFA House Price Index (HPI) reported a 0.5 percent increase in U.S. house prices in October from the previous month. From October 2016 to October 2017, house prices were up 6.6 percent.


Third quarter GDP rose at 3.2 percent in third and final estimate

Real gross domestic product (GDP) increased at an annual rate of 3.2 percent in the third quarter of 2017 according to the "third" estimate released by the Bureau of Economic Analysis. With this third estimate for the third quarter, personal consumption expenditures increased less than previously estimated, but the general picture of economic growth remains the same.


Leading Economic Index rose 0.4 in November, suggesting continued growth into 2018

The U.S. LEI rose again in November, suggesting that solid economic growth will continue into the first half of 2018. In recent months, unemployment insurance claims have returned to pre-hurricane levels. In addition, improving financial indicators, new orders in manufacturing and historically high consumer sentiment have propelled the U.S. LEI even higher.


Wednesday, December 20, 2017

November existing home sales rose 5.6 percent to strongest pace in almost 11 years

Existing-home sales surged for the third straight month in November and reached their strongest pace in almost 11 years, and were up 5.6 percent from October and 3.8 percent year-on-year. All major regions except for the West saw a significant hike in sales activity last month.


Tuesday, December 19, 2017

November building permits dip 1.4 percent from October but still up 3.4 percent year-on-year

Privately-owned housing units authorized by building permits in November were at a seasonally adjusted annual rate of 1,298,000. This is 1.4 percent below the revised October rate of 1,316,000, but is 3.4 percent above the November 2016 rate of 1,255,000.


November housing starts reached highest level since June 2008

Privately-owned housing starts in November were at a seasonally adjusted annual rate of 1,297,000, or the highest rate since June 2008. This is 3.3 percent above the revised October estimate of 1,256,000 and is 12.9 percent above the November 2016 rate of 1,149,000.


Monday, December 18, 2017

Builder confidence index rises 5 points to 75 in December, highest since July 1999

Builder confidence in the market for newly-built single-family homes increased five points to a level of 74 in December on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI) after a downwardly revised November reading. This was the highest report since July 1999, over 18 years ago.


Friday, December 15, 2017

December Empire State Manufacturing Survey dips slightly but still positive

Business activity continued to grow at a solid clip in New York State, according to firms responding to the December 2017 Empire State Manufacturing Survey. The headline general business conditions index, at 18.0, remained close to last month’s level. Labor market indicators pointed to a small increase in employment but no change in hours worked. Both input prices and selling prices rose at a somewhat faster pace than last month. Indexes assessing the six-month outlook suggested that firms remained optimistic about future business conditions.


November industrial production inched up 0.2 percent from October and 3.4 percent year-on-year

Industrial production moved up 0.2 percent in November after posting an upwardly revised increase of 1.2 percent in October. Total industrial production was 106.4 percent of its 2012 average in November and was 3.4 percent above its year-earlier level. Capacity utilization for the industrial sector was 77.1 percent in November, a rate that is 2.8 percentage points below its long-run (1972–2016) average.


Thursday, December 14, 2017

Initial unemployment claims fall 11,000 in latest report

In the week ending December 9, initial unemployment claims were 225,000, a decrease of 11,000 from the previous week's unrevised level of 236,000. The 4-week moving average was 234,750, a decrease of 6,750 from the previous week's unrevised average of 241,500.


Mortgage applications dip 2.3 percent in weekly survey

The Market Composite Index decreased 2.3 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 1 percent and refinancing down 3 percent.  The average contract interest rate for 30-year fixed-rate mortgages increased to 4.20 percent.


Business inventories fell in October as sales grew, cramping inventory investment

U.S. business inventories fell 0.1 percent in October amid strong sales growth of 0.6 percent, suggesting that inventory investment will probably not provide a large boost to economic growth in the fourth quarter.


Bloomberg Consumer Comfort Index drops one point but still at elevated levels

Even though it eased by one percentage point to 51.3, the measure of consumer comfort for the latest reporting week was still the highest for any comparable period since 2000, suggesting holiday sales will be robust.


November retail sales up 0.8 percent as strong holiday shopping season begins

U.S. retail sales rose by 0.8 percent in November and the previous month was revised higher to a gain of 0.5 percent, indicating a broad strengthening of consumer demand as the holiday shopping season got under way.


Federal Reserve hikes interest rates another quarter point

Hurricane-related disruptions and rebuilding have affected economic activity, employment, and inflation in recent months but have not materially altered the outlook for the national economy. In view of realized and expected labor market conditions and inflation, the Committee decided to raise the target range for the federal funds rate to 1-1/4 to 1-1/2 percent.


A Look Ahead to 2018: All systems go, but tax reform impact unknown

In 2017, we saw an economy and a housing market gaining momentum, for one of the longest rebounds in modern history. For 2018, the International Monetary Fund (IMF) is projecting global growth of 3.7 percent, for a slight improvement over 3.6 percent in 2017.

Here in America – and due to a second half of 2017 that was much stronger than the first – the Federal Reserve is projecting the U.S. economy to grow by 2.5 percent in 2018 after finishing 2017 with the same growth rate.

For housing, although tax reform is likely to negatively impact the housing market in both high-priced and second-home markets moving forward, both the overall U.S. economy and new home sales are expected to continue strengthening in the year head.  To combat future inflation, the Federal Reserve is planning on three more rate hikes in 2018, and has stated that it sees some moderate additional growth of about 0.4 percentage points in GDP resulting from tax reform.

However, what may be good for housing demand in terms of low unemployment has also meant tighter labor market conditions, especially for skilled construction trades.  As of October 2017, open jobs in the building industry rose to nearly 230,000, likely setting the stage for higher wage growth ahead.

In addition, the cost of building materials continues to rise, especially for wood products and for Canadian lumber subject to a 21 percent excise tax.

Although an analysis funded by the National Association of Realtors has suggested that tax reform could lower housing prices throughout the country, a larger problem may be that it could discourage existing homeowners from selling to take on pricier non-grandfathered mortgages, or even stay in place for five rather than two years to save on capital gains taxes.  In both of these scenarios, the pace of sales could slow at a time when more supply is needed.

Of course one question mark will be the mindset of Millennials, some of whom are now at that age where they’re starting to form new households, and even leaving urban areas in search of more affordable options in the suburbs.

According to NAR’s 2017 Profile of Buyers and Sellers, the share of sales to first-time buyers averaged 34 percent during the year, down one percentage point of 35 percent.  Still, given that the share of first-time buyers since 1981 has averaged 39 percent, builders have a unique opportunity to fill in the gap by focusing more on the Milllennial cohort.

One way builders are responding to Millennial demand includes building smaller single-family homes, with the median size falling by nearly four percent to 2378 square feet between the third quarters of 2014 and 2017. For multi-family homes, median home sizes fell by 1.5 percent during the same time period to 1168 square feet.

Even with these changes, however, the industry is still catching up from the Great Recession in many areas.  According to the National Association of Home Builders/First American Leading Markets Index (LMI) for the third quarter of 2017, markets in just 58 percent of the 337 metro areas nationwide returned to or exceeded their last normal levels of economic and housing activity, for a net gain of about 40 markets over the previous year.  Nationally, the index stood at 1.03, meaning that the nationwide average is running at 103% of normal economic and housing activity.

Nonetheless, the individual components of the LMI have not recovered equally: While employment has reached 99 percent of normal activity and home prices have rebounded to 155 percent of normal, single-family permits are running at just 56 percent of historic norms.

In order to address this disconnect between supply and demand, the Rosen Consulting Group recently conducted its own study for the NAR.  In its recent white paper “Rebuildingthe American Dream: Strategies to Sustainably Increase Homeownership,” Rosen’s team identifies 25 ideas to bolster homeownership.

While some suggestions are repeats of past ideas – such as addressing restrictive zoning laws, offering down payment savings programs, tackling the burden of student debt, and a nationwide counseling program for homeowners who previously experienced foreclosure and may be hesitant to consider buying a home again – others are more focused on emerging technologies in the industry or even re-thinking land use strategies.  These include promoting more pre-fabricated or modular housing, boosting training and apprenticeship programs, and more liberal use of Accessory Dwelling Units (ADUs), such as granny flats, on single-family lots in high-cost areas.

With new supply seemingly under assault from multiple causes, multiple solutions will likely be required.

Wednesday, December 13, 2017

November Consumer Price Index up 2.2 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.4 percent in November and 2.2 percent year-on-year. The index for all items less food and energy increased 0.1 percent in November and 1.7 percent year-on-year.


Tuesday, December 12, 2017

November Small Business Optimism Index rises to highest level in 34 years

Not since the roaring Reagan economy has small business optimism been as high as it was in November, according to the National Federation of Independent Business (NFIB) Index of Small Business Optimism, rising another 3.7 points in November to 107.5.


November Producer Price Index up 3.1 percent year-on-year, highest rate since January 2012

The Producer Price Index for final demand increased 0.4 percent in November. On an unadjusted basis, the final demand index rose 3.1 percent for the 12 months ended in November, the largest advance since a 3.1-percent increase for the 12 months ended January 2012.


Monday, December 11, 2017

Job openings fell 2.9 percent in October as hires rate rose more than separations

The number of job openings fell by nearly three percent to 6.2 million on the last business day of October. Over the month, hires increased 4.4 percent to 5.6 million and separations fell 1.3 percent to 5.2 million.


Friday, December 8, 2017

Bloomberg Consumer Comfort Index rises to 13-week high

Improved sentiment about the buying climate and personal finances helped carry household optimism to a 13-week high to 52.3. One sign of the stock market’s effect on optimism was that confidence among those who are unemployed, which includes retirees, reached a new 16-year high as the values of retirement accounts climbed.

Consumer sentiment index dips to 96.8 in early December reading

Consumer sentiment has remained quite favorable although it continued to slowly recede in early December from its October cyclical peak. Most of the recent decline was concentrated in the long-term prospects for the economy, while consumers thought current economic conditions have continued to improve.

November consumer credit use rose at highest rate in 11 months

American consumers increased their borrowing by $20.5 billion in October. It was the biggest gain in 11 months and reflected strong increases in the use of credit cards and in auto and student loans.

Job growth dipped slightly in November to 228,000, unemployment rate remains at 4.1 percent

Total nonfarm payroll employment increased by 228,000 in November, and the unemployment rate was unchanged at 4.1 percent. Employment continued to trend up in professional and business services, manufacturing, and health care.

The labor force participation rate remained at 62.7 percent in November and has shown no clear trend over the past 12 months. The employment-population ratio, at 60.1 percent, changed little in November and has shown little movement, on net, since early this year.


Wednesday, December 6, 2017

3Q 2017 productivity grew at 4.1 percent, highest rate since 3Q 2014

Nonfarm business sector labor productivity increased 3.0 percent during the third quarter of 2017, as output increased 4.1 percent and hours worked increased 1.1 percent. The productivity increase was the largest since the third quarter of 2014, when output per hour increased 4.4 percent. From the third quarter of 2016 to the third quarter of 2017, productivity increased 1.5 percent, reflecting a 3.0-percent increase in output and a 1.5-percent increase in hours worked.


ADP: November job growth of 190,000 dips slightly from October

According to ADP, private-sector employment increased by 190,000 from October to November on a seasonally adjusted basis.  This compares with 235,000 jobs the previous month and 226,000 jobs in the  same month of 2016.


Tuesday, December 5, 2017

ISM November non-manufacturing index dips 2.7 points to 60.1

The NMI® registered 57.4 percent, which is 2.7 percentage points lower than the October reading of 60.1 percent. Comments from the survey respondents indicate that the economy and sector will continue to grow for the remainder of the year.


ISM November manufacturing index dips 0.5 points to 58.2

The November PMI® registered 58.2 percent, a decrease of 0.5 percentage point from the October reading of 58.7 percent. Comments from the panel reflect expanding business conditions, with New Orders and Production leading gains, employment expanding at a slower rate, order backlogs stable and expanding, and export orders all continuing to grow in November.


Monday, December 4, 2017

Markit Purchasing Managers' Index dipped slightly in October to 53.9

The seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers' Index™ (PMI™) registered 53.9 in November, down from 54.6 in October. The latest index reading signaled robust, albeit slower, overall growth in the manufacturing sector. The latest upturn was in line with the long-run series average.


Factory goods orders fall 0.1 percent in October after two months of strong growth

Orders for U.S. manufactured goods fell 0.1% to a seasonally adjusted $479.6 billion in October after two straight months of strong growth. Excluding transportation, a volatile part of the overall reading, factory orders were up 0.8% in October from the previous month. Orders were up 0.2% in the same time frame when excluding defense spending, another volatile part of factory orders figures.


Friday, December 1, 2017

October construction spending jumps at highest rate in five months

October construction spending increased 1.4 percent to $1.24 trillion, the swiftest advance in five months. Outlays on public construction projects jumped 3.9 percent, the largest gain since 2014. Spending on state and local government construction projects climbed 3.3 percent, while federal government construction spending soared 11.1 percent.