Monday, June 26, 2017

Dallas Fed: Manufacturing activity expanded in June, but at a slower pace

Texas factory activity increased in June, according to business executives responding to the Texas Manufacturing Outlook Survey. The production index, a key measure of state manufacturing conditions, fell 11 points to 12.3, indicating output grew but at a slower pace than in May.

Durable goods orders fell more than expected in May

Overall orders for durable goods fell 1.1 percent in May after declining 0.9 percent in April. Shipments also declined, suggesting a loss of momentum in the manufacturing sector.

Chicago Fed's National Activity Index slumped to -0.26 in May

Led by declines in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved down to –0.26 in May from +0.57 in April. The index’s three-month moving average declined to +0.04 in May from +0.21 in April.

Friday, June 23, 2017

Private sector output growth slows in June, but new orders rise at strongest pace for five months

U.S. private sector firms recorded a further solid expansion of business activity in June, but there was a loss of momentum since May. This was highlighted by the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index falling from 53.6 to 53.0 in June. The latest reading signalled the slowest upturn in business activity for three months.


May new home sales rebounded strongly to 610,000 units

Sales of new single-family houses in May 2017 were at a seasonally adjusted annual rate of 610,000, for the second-highest rate this year.  This level is also 2.9 percent above the revised April rate of 593,000 and is 8.9 percent above the May 2016 estimate of 560,000.


Thursday, June 22, 2017

Kansas City Fed: Manufacturing activity expands further in June

The Kansas City Fed's Tenth District manufacturing activity expanded further in June, and expectations for future activity remained strong. Price indexes were mixed, with some increases in raw materials prices. Firms reported faster growth in June than earlier in the second quarter, and the share of factories planning to add workers over the next six months also rose solidly.


Initial unemployment claims rise 3,000 in latest report

In the week ending June 17, initial unemployment claims were 241,000, an increase of 3,000 from the previous week's revised level. The 4-week moving average was 244,750, an increase of 1,500 from the previous week's revised average.

Mortgage applications rise 0.6 percent in latest survey

The Market Composite Index increased 0.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 2 percent and refinances up 2 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 4.13 percent.

FHFA: May home prices up 0.7 percent from April and 6.8 percent year-on-year

U.S. house prices rose in April, up 0.7 percent from the previous month, according to the Federal Housing Finance Agency (FHFA) seasonally adjusted monthly House Price Index (HPI).  From April 2016 to April 2017, house prices were up 6.8 percent.

Leading Economic Indicators increased 0.3 percent in May

The U.S. LEI continued on its upward trend in May, suggesting the economy is likely to remain on, or perhaps even moderately above, its long-term trend of about 2 percent growth for the remainder of the year. The improvement was widespread among the majority of the leading indicators except for housing permits, which declined again.

Wednesday, June 21, 2017

Existing home sales rebounded 1.1 percent in May while sales prices reached new high

Existing-home sales rebounded in May following a notable decline in April, and low inventory levels helped propel the median sales price to a new high while pushing down the median days a home is on the market to a new low.

Sunday, June 18, 2017

State of the Rental Market: Growth is Moderating but Long-Term Prospects Very Favorable

While it’s certainly no secret that the multi-family sector has been on a roll over the past few years, there have been some recent signs that its growth trajectory will continue to moderate this year. 

Nonetheless, with an economic expansion in its seventh year and an average of one million new renter households being formed over the past five years, these economic tailwinds should continue to support this sector over the near term. The long-term prognosis is even better, with a recent study concluding a need for 4.6 million new apartments between now and 2030.

For now, overall tenant demand remains strong, especially as more millennials continue to form new households after being delayed due to the Great Recession and paying off student loan debt. Nationally, the homeownership rate fell to a 51-year low of 63 percent last year, and is expected to remain around this level for at least the rest of the year.

Construction of new apartments is also expected to peak this year, especially as over-supply in some high-growth markets is beginning to impact both vacancy rates and rent growth. Mindful of this trend, construction lenders are also being more discreet, critically assessing the experience of developers, double-checking projected returns while acknowledging lower growth in operating income.

In addition, if government proposals for increased infrastructure spending see the light of day, this could mean increased competition for both the materials and labor required for more multi-family supply.

According to recent figures from brokerage Marcus & Millichap, most of the softening is beginning to occur for Class A buildings, both due to an increase in new product as well as historically weak absorption during the fourth quarter of 2016 being pushed into 2017. Nationally, this meant a large bump in Class A vacancy rates to over 6.5 percent. Yet instead of lowering asking rents to fill vacant units, many owners are betting that the strong spring and summer leasing season will mop up the excess supply.

For Class B properties, a slight rise in vacancies was often due to renters opting to make the leap to higher-quality apartments, especially in regions such as the South where the price difference between the two classes is the smallest.  Not surprisingly, the vacancy rate for Class C properties remains the lowest due to the strong demand for affordable housing.

Both Axiometrics and Yardi Matrix -- which regularly survey apartment communities across the country each month – have shown a similar softening in both rent growth and occupancy rates.  According to Axiometrics, although its surveyed properties had rebounded to the benchmark occupancy rate of 95 percent by May 2017, annual effective rent growth has stayed within a fairly narrow band of 2.0 to 2.2 percent over the past six months.

Yardi Matrix, however, showed an annual overall rental rate increase of 1.5 percent for the 12-month period ending in May 2017, down sharply from the 5.3 percent noted a year ago even though it reported an overall occupancy rate of 94.8 percent for April.

As Marcus & Millichap similarly found, this is largely due to a temporary over-supply in Yardi’s “Lifestyle” class, which caters to households who prefer to rent versus owning, and has resulted in flat growth. Meanwhile, low supply and strong demand for “Renter by Necessity” units helped propel their average rents by 2.6 percent over the same time period.

Due to this softening, as well as higher borrowing costs and proposed changes to fiscal policy and the tax code – including a possible end to the popular 1031 tax exchange program – investors have recently pulled back. Preliminary estimates for first quarter 2017 sales suggest a decline of 15 to 20 percent from the same period of 2016, although greater clarity on these policy changes would certainly lead to a rebound in investor interest.

In the longer term, a combination of delayed marriages, an aging population and continued legal immigration will continue to put increasing pressure on new apartment supply, but it’s not just the millennials filling these units. It’s also Baby Boomers and other empty-nesters over 45 who accounted for over half of new renter households over the last decade in search of the flexibility and convenience of apartment living.

With an annual projected demand of 325,000 new units per year through 2030 and an aging housing stock increasingly in need of renovations, there should be very favorable terms for well-financed investors, especially in high-cost and high-growth areas throughout the West and the South.

Friday, June 16, 2017

Industrial production unchanged in May following April boost

Industrial production was unchanged in May following a large increase in April and smaller increases in February and March. At 105.0 percent of its 2012 average, total industrial production in May was 2.2 percent above its year-earlier level. Capacity utilization for the industrial sector edged down 0.1 percentage point in May to 76.6 percent, a rate that is 3.3 percentage points below its long-run (1972–2016) average.


New York Fed: Manufacturing activity rebounds strongly in June

Business activity rebounded strongly in New York State, according to firms responding to the June 2017 Empire State Manufacturing Survey. The headline general business conditions index shot up twenty-one points to 19.8, its highest level in more than two years.


Philadelphia Fed: Manufacturing activity growth dips in June

Regional manufacturing continues to expand, according to results from the June Manufacturing Business Outlook Survey. The diffusion index for general activity fell from its reading in May but remained positive and continued to reflect growth. Although many of the future indicators also declined, firms continue to expect growth over the next six months. About one-third of the firms expect to add to their payrolls through the end of the year.