The Housing Chronicles Blog: 2018

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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December CPI up 0.1 percent from November and 2.1 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in December on a seasonally adjusted basis. Over the last 12 months, the all items index rose 2.1 percent. The index for all items less food and energy increased 0.3 percent in December,its largest increase since January 2017. The index for all items less food and energy increased 1.8 percent over the last year.

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Thursday, January 11, 2018

Initial unemployment claims rise 11,000 on post-holiday surge in latest report

In the week ending January 6, initial unemployment claims were 261,000, an increase of 11,000 from the previous week's unrevised level of 250,000. The 4-week moving average was 250,750, an increase of 9,000 from the previous week's unrevised average of 241,750.

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Bloomberg Consumer Comfort Index rises to best reading since March 2001 to start 2018

The weekly Consumer Comfort Index rose to 53.5, the best reading since March 2001. The improvement in sentiment at the start of the new year shows Americans are optimistic about economic conditions as unemployment remains at the lowest since 2000 and stocks continue to rally.

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December Producer Price Index dips 0.1 percent but up 2.6 percent for all of 2017

The Producer Price Index for final demand fell 0.1 percent in December, after rising 0.4 percent in both November and October. On an unadjusted basis, the final demand index climbed 2.6 percent in 2017 after a 1.7-percent rise in 2016.

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Wednesday, January 10, 2018

November wholesale sales up 1.5 percent from October and 9.8 percent year-on-year

November 2017 sales of merchant wholesalers were $492.4 billion, up 1.5 from the revised October level and were up 9.8 percent from the November 2016 level. Total inventories of merchant wholesalers were $611.0 billion at the end of November, up 0.8 percent from the revised October level.

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Atlanta Fed: January business inflation expectations decline to 2.0 percent over the next year

In January reading: Firms' inflation expectations declined slightly to 2.0 percent over the year ahead. Sales levels and profit margins both improved during the month, reaching their highest values since the survey began in October 2011.  On average, year-over-year unit costs increased to 2.0 percent.

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Gallup: Job optimism averaged 56 percent in 2007, a record high in 17 years

Americans' optimism about finding a quality job averaged 56% in 2017, the highest annual average in 17 years of Gallup polling and a sharp increase from 42% in 2016. Coinciding with rising optimism, the U.S. unemployment rate fell from an average 4.9% in 2016 to 4.4% in 2017, the lowest rate since 2000.

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Gallup: Economic Confidence Index averaged +6 in 2017, first positive annual average since 2008

Americans' views of the U.S. economy were positive on balance in 2017, with Gallup's U.S. Economic Confidence Index averaging +6 for the year. This was a 16-point increase from -10 in 2016 and is the index's first positive annual average since Gallup began daily tracking of this measure in 2008.

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Tuesday, January 9, 2018

November consumer credit use rose at highest level in over 16 years

Outstanding consumer credit rose by $27.95 billion in November from the prior month, the biggest increase since November 2001.

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December Small Business Optimism Index dips slightly, but 2017 strongest year in survey history

The Optimism Index for last month came in at 104.9, slightly lower than the near-record November report but still a historically exceptional performance. That makes 2017 the strongest year ever in the history of the survey. The average monthly Index for 2017 was 104.8. The previous record was 104.6, set in 2004.

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November job openings fell 0.8 percent while hires fell by 1.9 percent

The number of job openings fell 0.8 percent to 5.9 million on the last business day of November. Over the month, hires fell 1.9 percent, while separations fell 0.9 percent.

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Monday, January 8, 2018

GDPNow: 4th Quarter growth estimate 2.7 percent as of 1/5/18

The GDPNow model forecast for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2017 is 2.7 percent on January 5, down from 3.2 percent on January 3. The forecasts of real consumer spending growth and real private fixed-investment growth decreased from 3.2 percent and 8.9 percent, respectively, to 3.0 percent and 7.6 percent, respectively, after this morning's employment report from the U.S. Bureau of Labor Statistics and this morning's Non-Manufacturing ISM Report On Business from the Institute for Supply Management.

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Friday, January 5, 2018

Non-manufacturing index dipped to 55.9 percent in December

The NMI® registered 55.9 percent, which is 1.5 percentage points lower than the November reading of 57.4 percent. There has been a second consecutive month of pullback in the rate of growth. Overall, the majority of respondents' comments indicate that they finished the year on a positive note. They also indicate optimism for business conditions and the economic outlook going forward.

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November factory orders rose by 1.3 percent, marking four months of increases

New orders for U.S.-made goods increased in November by 1.3 percent - rising for a fourth straight month -- but business spending on equipment appeared to be cooling after robust growth in 2017.

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BLS: December job growth of 148,000, unemployment remained at 4.1 percent

Total nonfarm payroll employment increased by 148,000 in December, and the unemployment rate was unchanged at 4.1 percent. Employment gains occurred in health care, construction, and manufacturing.


The labor force participation rate, at 62.7 percent, was unchanged over the month and over the year. The employment-population ratio was unchanged at 60.1 percent in December but was up by 0.3 percentage point over the year.

Thursday, January 4, 2018

IHS Markit Services Business Activity Index dipped .8 points in December

The seasonally adjusted final IHS Markit U.S. Services Business Activity Index registered 53.7 in December, down from 54.5 in November. The latest index was higher than the earlier ‘flash’ reading (52.4) and indicated a solid increase in business activity at US service providers. A number of panel members suggested the upturn was due to greater client demand and increased new order volumes. However, the overall rate of activity growth was the weakest since May and below the series trend.

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2017 Bloomberg Consumer Comfort Index highest average since 2001

American consumers last year were more upbeat on average than at any time since 2001, reflecting more favorable views of the economy, personal finances and the buying climate. The overall comfort measure averaged 50.0 in 2017, up from 43.6 a year earlier and the best reading since 51.8 in 2001.  The weekly index in the last week of 2017 eased to 51.8 from 52.4.


Initial unemployment claims rise 3,000 in latest report

In the week ending December 30, initial unemployment claims were 250,000, an increase of 3,000 from the previous week's revised level. The 4-week moving average was 241,750, an increase of 3,500 from the previous week's revised average.

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December's planned job cuts dip 7.4 percent from November; annual total lowest since 1990

U.S.-based employers announced 32,423 job cuts in the last month of the year, bringing the year-end total to 418,770, or the lowest annual total since 1990.  Last month saw a 7.4 percent decrease from November's total of 35,038, and a 3.6 percent decrease from the 33,627 cuts announced in the same month last year.

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ADP: Private Sector Employment Increased by 250,000 Jobs in December

Private-sector employment increased by 250,000 from November to December, on a seasonally adjusted basis.

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Wednesday, January 3, 2018

Federal Reserve releases December meeting minutes

The information reviewed for the December 12-13 meeting indicated that labor market conditions continued to strengthen through November and suggested that real gross domestic product (GDP) was rising at a solid pace in the second half of 2017. Total consumer price inflation, as measured by the 12-month percentage change in the price index for personal consumption expenditures (PCE), remained below 2 percent in October and was lower than early in the year.

Recent information on housing activity suggested that real residential investment spending was edging up in the fourth quarter after declining in the previous two quarters. Both starts and building permit issuance for new single-family homes increased somewhat in October, and starts for multifamily units moved up considerably. Sales of both new and existing homes rose moderately in October.

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ISM Manufacturing Index rose 1.5 percentage points to 59.7 in December

The December PMI® registered 59.7 percent, an increase of 1.5 percentage points from the November reading of 58.2 percent. Comments from the panel reflect expanding business conditions, with new orders and production leading gains; employment expanding at a slower rate; order backlogs expanding at a faster rate; and export orders and imports continuing to grow in December.

Mortgage applications dip 2.8 percent over two-week holiday period

The Market Composite Index decreased 2.8 percent on a seasonally adjusted basis from two weeks earlier, with purchase loans up 1 percent but refinances down 7 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged from the week prior at 4.25 percent.

Online job vacancies jumped 4.9 percent in December

Online advertised vacancies increased 229,700, or 4.9 percent,  to 4,930,700 in December, according to The Conference Board Help Wanted OnLine® (HWOL) Data Series,released today. The November Supply/Demand rate stands at 1.41 unemployed for each advertised vacancy, with a total of 1.9 million more unemployed workers than the number of advertised vacancies.

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November construction spending rose 0.8 percent to all-time high of $1.257 trillion

November construction spending rose 0.8 percent to an all-time high annual rate of $1.257 trillion, with private residential projects soaring 1.0 percent to the highest level since February 2007.  This increase was in line with a recent jump in homebuilding and supports the view that housing would boost economic growth in the fourth quarter after being a drag to gross domestic product since the April-June period.

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Tuesday, January 2, 2018

IHS Markit PMI: December manufacturing index up to highest level since March 2015

The seasonally adjusted IHS Markit final US Manufacturing Purchasing Managers’ Index™ (PMI™) registered 55.1 in December, up from 53.9 in November. The latest index reading was the highest since March 2015 and signalled a solid improvement in the health of the sector. December data also rounded off the strongest quarterly performance since the start of 2015.

November CoreLogic HPI: Home prices up 1 percent from October and 7 percent year-on-year

According to the CoreLogic HPI, home prices nationally increased year over year by 7 percent from November 2016 to November 2017, and on a month-over-month basis home prices increased by 1 percent in November 2017 compared with October 2017.