The Housing Chronicles Blog

Friday, August 17, 2018

2Q 2018 online retail sales grew 3.7 times faster than overall retail year-on-year

Online retail sales grew 3.7 faster than overall retail sales for the year ending in 2Q 2018. During the previous year, online retail sales rose by 15.5 percent versus 4.2 percent for all retail sales. The share of retail sales rose to 9.6 percent in 2Q 2018, up from 8.8 percent year-on-year.

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Leading Economic Index rose 0.6 points in July to 110.7


The U.S. LEI increased in July, suggesting the US economy will continue expanding at a solid pace for the remainder of this year.  The strengths among the components of the leading index were very widespread, with unemployment claims, the financial components, and the ISM® New Orders Index making the largest positive contributions.


July housing starts rebounded 0.9 percent from June, but down 1.4 percent year-on-year

Privately-owned housing starts in July were at a seasonally adjusted annual rate of 1,168,000. This is 0.9 percent above the revised June estimate of 1,158,000, but is 1.4 percent below the July 2017 rate of 1,185,000.

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Thursday, August 16, 2018

Initial unemployment claims dip by 2,000 in weekly report

In the week ending August 11, initial unemployment claims were 212,000, a decrease of 2,000 from the previous week's revised level. The 4-week moving average was 215,500, an increase of 1,000 from the previous week's revised average.

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July industrial production up 0.1 percent from June and 4.2 percent year-on-year

Industrial production edged up 0.1 percent in July after rising at an average pace of 0.5 percent over the previous five months. At 108.0 percent of its 2012 average, total industrial production was 4.2 percent higher in July than it was a year earlier.

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July building permits rose 1.5 percent from June and 4.2 percent year-on-year

Privately-owned housing units authorized by building permits in July were at a seasonally adjusted annual rate of 1,311,000. This is 1.5 percent above the revised June rate of 1,292,000 and is 4.2 percent above the July 2017 rate of 1,258,000.

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Wednesday, August 15, 2018

Mortgage applications dip 2.0 percent, rates slip three basis points

The Market Composite Index decreased 2.0 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 30 percent and refinance activity remaining flat. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.81 percent from 4.84 percent.

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Inflation expectations for business remain unchanged at 2.1 percent in the year ahead

Firms' inflation expectations went unchanged at 2.1 percent over the year ahead. Current economic environment: Sales levels remain "about normal," on average. Profit margins improved somewhat, and year-over-year unit costs increased somewhat to 2.0 percent, on average.

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Retail sales up 0.5 percent in July and 6.4 percent year-on-year

U.S. retail sales rose a healthy 0.5% in July, although June's sales were reduced from a 0.5% to a 0.2% gain. Retail sales rose 0.6% minus gas stations and auto dealers.  Over the last year, retail sales have increased 6.4%, close to the long-run average since 1980.

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2Q 2018 productivity up 2.9 percent from 1Q versus 1.3 percent year-on-year

Nonfarm business sector labor productivity increased 2.9 percent during the second quarter of 2018, as output increased 4.8 percent and hours worked increased 1.9 percent. From the second quarter of 2017 to the second quarter of 2018, productivity increased 1.3 percent, reflecting a 3.5-percent increase in output and a 2.2-percent increase in hours worked.

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August builder confidence drops one point to 67, buyer traffic index falls below 50

Builder confidence in the market for newly-built single-family homes edged down one point to a solid 67 reading in August on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI index measuring current sales conditions inched one point lower to 73 while the component gauging expectations in the next six months all fell a single point to 72. Meanwhile, the metric charting buyer traffic dropped two points to 49.

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Tuesday, August 14, 2018

Total household debt rose another 0.6 percent to all-time high, delinquency rates stable at low levels

Total household debt increased by $82 billion (0.6%) to $13.29 trillion in the second quarter of 2018. It was the 16th consecutive quarter with an increase, and the total is now $618 billion higher than the previous peak of $12.68 trillion, from the third quarter of 2008. Further, overall household debt is now 19.2% above the post-financial-crisis trough reached during the second quarter of 2013.

While overall delinquency rates have remained stable at relatively low levels, transition rates into delinquency have fallen noticeably for student debt over the past year, reflecting an improved labor market and increased participation in various income-driven repayment plans.

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July Small Business Optimism Index rose to second-highest level in 45-year history

The Small Business Optimism Index marked its second highest level in the survey’s 45-year history at 107.9, rising to within 0.1 point of the July 1983 record-high of 108. The July 2018 report also set new records in terms of owners reporting job creation plans and those with job openings.

A seasonally adjusted net 23 percent are planning to create new jobs, up three points from June. Thirty-seven percent of all owners reported job openings they could not fill in the current period, a one-point increase from June.

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Friday, August 10, 2018

Consumer sentiment slips to lowest level in nearly a year in mid-August read


Consumer sentiment slipped to its lowest level since last September, with the decline concentrated among households in the bottom third of the income distribution. The dominating weakness reflected much less favorable assessments of buying conditions, mainly due to less favorable perceptions of market prices.

These are extraordinary shifts in price perceptions given that consumers anticipate an inflation rate in the year ahead of 2.9% in early August, unchanged from last month. The data suggest that consumers have become much more sensitive to even relatively low inflation rates than in past decades.

Overall, the data indicate that consumers have little tolerance for overshooting inflation targets, and to the benefit of the Fed, interest rates now play a more decisive role in purchase decisions.


Second Quarter 2018 Economic Update: The Strongest Growth since 2014, But Will it Last?

It was certainly good news to hear that the initial estimate for GDP growth of 4.1 percent in the second quarter of 2018 was the fastest since the third quarter of 2014. This recent rate of growth compares to 2.2 percent in the first quarter of 2018, 2.3 percent in 2017 and 1.5 percent in 2016. As of early August, GDPNow was also forecasting third quarter growth of 4.3 percent, although both these GDP estimates and forecasts are likely to change as more information comes in.

Most of the surge noted during the second quarter was due to a boost in consumer spending (along with the highest levels of consumer confidence in years), exports, nonresidential fixed investment (including commercial real estate, factories and machinery) and government spending. It would have been even higher were it not for declines in private inventory investment by businesses and residential fixed investment (including home building and remodeling).

One political factor weighing heavily on the boost in growth was the export of goods, with its rise quadrupling from the first quarter to 13.3 percent, as numerous countries stocked up in advance in order to avoid real and potential retaliatory tariffs.   This export surge itself was responsible for about one full point of the 4.1-percent GDP increase. At the same time, the rate of import growth fell sharply to just 0.5 percent, indicating that domestic suppliers either had adequate inventories or capacity to meet demand.

Another political factor was the tax cuts enacted at the beginning of 2018, which boosted consumer spending after a lag in the first quarter, and led to large corporations buying hundreds of billions of their own shares, thus helping to support the stock market. A healthy stock market, in turn, improves both 401k balances as well as consumer confidence.

What we don’t know yet is if the export surge or the boost in consumer spending is sustainable, but we’ll find that out through the rest of the year.

For now, the job market remains tight, with July unemployment dipping back to 3.9 percent along with 157,000 new positions. Looking at just the second quarter of 2018 alone, job growth rose by over 21 percent versus the same quarter of 2017. Moreover, for the first seven months of 2018, job growth increased by over 16 percent versus 2017.

Wages, which had remained stubbornly flat throughout much of the economic recovery, surged during the second quarter of 2018 by 2.8 percent over the previous year, for the sharpest increase since the third quarter of 2008.

Still, with inflation slowly on the rise, most of these wage gains are being eaten up by higher costs for energy, transportation and shelter. Annual core inflation readings from the CPI, PPI and PCE Price Index have recently ranged from 1.9 to 2.8 percent versus the Fed’s preferred increase of 2.0 percent. It’s for that reason that we’re likely to see a total of four interest rate increases by the Fed this year, and up to three more in 2019.

For the housing market, although home builders continue to push forward on meeting demand, they’re up against several headwinds including higher mortgage rates (up 18 percent annually through the first week of August), higher building costs (especially tariffs on Canadian timber) and ongoing difficulties locating suitable land and labor.

Although average monthly housing starts and building permits did fall by a small amount between the first and second quarters of 2018, they were still up moderately for the first half of the year versus 2017. New single-family home sales, which averaged an annual rate of 646,000 in the second quarter of 2018, were also up 6.4 percent for the first half of the 2018 versus 2017.

The pricing premium for new versus existing homes, which approached 40 percent as recently as the end of 2017, steadily fell to just nine percent by June of 2018, thus making a new home much more competitive. In fact, forecasters are pointing to the new home market to drive the housing market in the near term, as the existing home market remains penned in by low inventory, increasing affordability issues and higher interest rates.

Still, with the backlog of unsold new single-family homes rising to 5.7 months in June, some builders are also facing similar affordability challenges with their buyers. In the long run, however, given the huge pent-up demand for housing in the U.S., only the most serious shocks to the economy are likely to derail the long and slow recovery.