The Housing Chronicles Blog: 2017

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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Thursday, November 30, 2017

Initial unemployment claims decline 2,000 in weekly report

In the week ending November 25, the advance figure for seasonally adjusted initial claims was 238,000, a decrease of 2,000 from the previous week's revised level. The 4-week moving average was 242,250, an increase of 2,250 from the previous week's revised average.

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Mortgage applications fall 3.1 percent in latest survey; rates flat

The Market Composite Index decreased 3.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans down two percent and refinances falling eight percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged from the week prior at 4.20 percent.

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Fed's Beige Book shows continued modest growth, but home construction remains constrained

Economic activity continued to increase at a modest to moderate pace in October and mid-November, according to anecdotal reports from contacts across the 12 Federal Reserve Districts. Residential real estate activity remained constrained, with most Districts reporting little growth in sales or construction. By contrast, nonresidential activity was consistent with previous reports of slight growth.

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Personal income and spending both rose in October, PCE price index up 1.6 percent year-on-year

In October, personal income increased 0.4 percent, disposable personal income (DPI) increased 0.5 percent and personal consumption expenditures (PCE) increased 0.3 percent.  The PCE price index increased 0.1 percent, and is up 1.6 percent year-on-year. Excluding food and energy, the PCE price index increased 0.2 percent, and is up 1.4 percent year-on-year.

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Wednesday, November 29, 2017

Pending home sales rebounded 3.5 percent in October but still down 0.6 percent year-on-year

Pending home sales rebounded 3.5 percent in October following three straight months of diminishing activity, but were still down 0.6 percent year-on-year. All major regions except for the West saw an increase in contract signings last month.

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Third quarter GDP growth revised up to 3.3 percent in second estimate, highest rate in three years

Real gross domestic product (GDP) increased at an annual rate of 3.3 percent in the third quarter of 2017, according to the "second" estimate released by the Bureau of Economic Analysis, for the highest rate in three years. This growth rate compares to 3.0 percent in the first estimate and 3.1 percent in the second quarter.

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Tuesday, November 28, 2017

State Street Global Investor Confidence Index slips slightly in November

The Global Investor Confidence Index decreased to 97.1, down 1.0 point from October’s revised reading of 98.1. The minor decline in global sentiment was driven largely by a 12.0 point drop in the European ICI to 81.0. By contrast, the North American ICI rose by 3.7 points to 102.6 and the Asian ICI increased by 1.0 point to 97.5.

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Gallup: Economic Confidence Index leaps 7 points in latest survey

Americans' confidence in the economy spiked last week, with Gallup's U.S. Economic Confidence Index averaging +11 for the week ending Nov. 26 -- an increase of seven points from the previous reading of +4.

Last week's gain in economic confidence was more than twice as large as the average gain. This may be a result of the improving economy which, in turn, has allowed more Americans to have the resources to enjoy the holiday week by traveling or shopping. To that point, AAA estimated that the highest number of Americans traveled this past Thanksgiving week since 2005.

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Consumer confidence extends winning steak for fifth straight month

Consumer confidence increased for a fifth consecutive month and remains at a 17-year high. Consumers’ assessment of current conditions improved moderately, while their expectations regarding the short-term outlook improved more so, driven primarily by optimism of further improvements in the labor market. Consumers are entering the holiday season in very high spirits and foresee the economy expanding at a healthy pace into the early months of 2018.

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Case Shiller: September home prices up 0.4 percent from August 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 September, up from 5.9% in the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 0.4%.

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FHFA House Price Index up 1.4 percent in 3Q 2017 and 6.5 percent year-on-year

U.S. house prices rose 1.4 percent in the third quarter of 2017 according to the Federal Housing Finance Agency (FHFA) House Price Index (HPI).  House prices rose 6.5 percent from the third quarter of 2016 to the third quarter of 2017. FHFA’s seasonally adjusted monthly index for September was up 0.3 percent from August.

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Monday, November 27, 2017

Markit Purchasing Managers Index eases slightly in November to 54.6

November data pointed to another solid increase in U.S. private sector output, supported by sustained growth in both manufacturing and services activity. At 54.6, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index was above the 50.0 no-change threshold, but eased from 55.2 in October.

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October new home sales rose to 10-year high, up 18.7 percent year-on-year

Sales of new single-family houses in October 2017 were at a seasonally adjusted annual rate of 685,000. This is 6.2 percent above the revised September rate of 645,000, 18.7 percent above the October 2016 estimate of 577,000 and the highest sales rate since October 2007.

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FOMC meeting minutes reveal continued growth despite hurricane-related disruptions

The information reviewed for the October 31-November 1 meeting indicated that labor market conditions generally continued to strengthen and that real gross domestic product (GDP) expanded at a solid pace in the third quarter despite hurricane-related disruptions.

Al­though the effects of the recent hurricanes led to a reported decline in payroll employment in September, the unemployment rate decreased further. Retail gasoline prices jumped in the aftermath of the hurricanes, but 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 September and was lower than early in the year. Survey‑based measures of longer-run inflation expectations were little changed on balance...

The U.S. economic projection prepared by the staff for this FOMC meeting was broadly similar to the previous forecast. Real GDP was expected to rise at a solid pace in the fourth quarter of this year, boosted in part by a rebound in spending and production after the negative effects of the hurricanes in the third quarter. Payroll employment was also expected to rebound during the fourth quarter.

Beyond 2017, the forecast for real GDP growth was essentially unrevised. In particular, the staff continued to project that real GDP would expand at a modestly faster pace than potential output through 2019. The unemployment rate was projected to decline gradually over the next couple of years and to continue running below the staff's estimate of its longer-run natural rate over this period...

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.

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Wednesday, November 22, 2017

Initial unemployment claims fall by 13,000 in most recent report

In the week ending November 18, initial unemployment claims were 239,000, a decrease of 13,000 from the previous week's revised level. The 4-week moving average was 239,750, an increase of 1,250 from the previous week's revised average.

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Mortgage applications rise 0.1 percent in latest survey

The Market Composite Index increased by 0.1 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 5.0 percent and refinances declining the same amount. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 4.20 percent.

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November consumer sentiment dips from October's decade peak but still at high levels

Consumer sentiment narrowed its loss from mid-month, although it was still slightly below last month's decade peak. Overall, the Sentiment Index has remained largely unchanged since the start of the year at the highest levels since 2004. Overall, the data signal an expected gain of 2.7% in real consumption expenditures in 2018, and more importantly for retailers, the best runup to the holiday shopping season in a decade.

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Tuesday, November 21, 2017

October Chicago Fed National Activity Index rose sharply in September

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rose to +0.65 in October from +0.36 in September. The index’s three-month moving average, CFNAI-MA3, increased to +0.28 in October from +0.01 in September.

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October existing home sales rise 2.0 percent but still down 0.9 percent year-on-year

Existing-home sales increased in October by 2.0 percent to their strongest pace since earlier this summer, but continual supply shortages led to fewer closings on an annual basis for the second straight month.  After last month's increase, sales are at their strongest pace since June (5.51 million), but still remain 0.9 percent below a year ago.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.”

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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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.

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Tuesday, October 31, 2017

Case Shiller Index up 0.5 percent in August and 5.9 percent year-on-year

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index reported a 6.1% annual gain in August, up from 5.9% in the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 0.5% in August.

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October consumer confidence rises to highest level in almost 17 years

Consumer confidence increased to its highest level in almost 17 years October after remaining relatively flat in September. Consumers’ assessment of current conditions improved, boosted by the job market which had not received such favorable ratings since the summer of 2001.

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Employee compensation costs up 0.7 percent in 3Q 2017 and 2.5 percent year-on-year

Compensation costs for civilian workers increased 0.7 percent, seasonally adjusted, for the 3-month period ending in September 2017. Wages and salaries increased 0.7 percent, and benefits increased 0.8 percent. Costs increased 2.5 percent for the 12-month period ending in September 2017.

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State Street Investor Confidence Index hits 6-month low on concerns about more hawkish Fed Chair

The State Street Global Investor Confidence hits 6-month low in October, declining by 7.5 points to 96.9. Confidence in all three regions drops amidst the increasing potential for a new Fed Chair.

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October Chicago Business Barometer rises to highest level since March 2011

The MNI Chicago Business Barometer rose to 66.2 in October, up from 65.2 in September, hitting the highest level since March 2011.

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Monday, October 30, 2017

Lennar to buy CalAtantic to become No. 1 home builder

Home builder Lennar has announced an industry-changing purchase of CalAtlantic (itself the merger of Ryland and Standard Pacific in 2015):

The business combination will create the nation's largest homebuilder with the last twelve months of revenues in excess of $17 billion and equity market capitalization, based on current market prices, of approximately $18 billion. The combined company will control approximately 240,000 homesites and will have approximately 1,300 active communities in 49 markets across 21 states, where approximately 50% of the U.S. population currently lives.
It is currently anticipated that the transaction will generate annual cost savings and synergies of approximately $250 million, with approximately $75 million achieved in fiscal year 2018. These synergies are expected to be achieved through direct cost savings, reduced overhead costs and the elimination of duplicate public company expenses. Additional savings are also expected through production efficiencies, technology initiatives, and the roll out of Lennar's digital marketing and dynamic pricing programs.
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Inflation tracker PCE Price Index up 0.4 percent in September and 1.6 percent year-on-year

The PCE price index increased 0.4 percent in September, and was up 1.6 percent year-on-year. Excluding food and energy, the PCE price index increased 0.1 percent, and was up 1.3 percent year-on-year.

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Personal income up 0.4 percent in September while spending spiked up 1.0 percent

Both personal income and disposable income increased 0.4 percent in September, while personal consumption expenditures (PCE) increased by a much sharper 1.0 percent. The August and September estimates of personal income and outlays reflect the effects of Hurricanes Harvey and Irma.  Partly as a result, the personal savings rate slipped to 3.1 percent, down from 3.6 percent in August and the lowest rate since December 2007, at the beginning of the Great Recession.

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Friday, October 27, 2017

Consumer sentiment slips slightly in late October but still at high levels

Consumer sentiment slipped ever so slightly in late October, despite remaining at its highest monthly level since the start of 2004. This is only the second time the Sentiment Index has been above 100.0 since the end of the record 1990's expansion, and its average during the first ten months of 2017 (96.7) has been the highest since 2000 (108.5).

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Third quarter GDP rose by 3.0 percent in first estimate

Real gross domestic product (GDP) increased at an annual rate of 3.0 percent in the third quarter of
2017 according to the "advance" estimate released by the Bureau of Economic Analysis. In the

second quarter, real GDP increased 3.1 percent.

Thursday, October 26, 2017

Initial unemployment claims rise by 10,000 in latest report

In the week ending October 21, initial unemployment claims were 233,000, an increase of 10,000 from the previous week's revised level. The 4-week moving average was 239,500, a decrease of 9,000 from the previous week's revised average.

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Mortgage applications fall 4.6 percent in latest survey as rates rise four basis points

The Market Composite Index decreased 4.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 6 percent percent and refinances falling 3 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.18 percent from 4.14 percent.

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Weekly Bloomberg Consumer Comfort Index mostly flat in latest reading

Americans' confidence held steady last week, remaining near the highest level of the expansion, as faith in the buying climate improved while views on the economy deteriorated slightly.

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September Pending Home Sales Index flat from August, down 3.5 percent year-on-year on supply constraints

The Pending Home Sales Index was at 106.0 in September, unchanged from August.  The index is now at its lowest reading since January 2015 (104.7), is 3.5 percent below a year ago, and has fallen on an annual basis in five of the past six months.

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Wednesday, October 25, 2017

September durable goods orders up another 2.2 percent as global economy expands

Durable-goods orders rose 2.2 percent in September; excluding transportation orders increased 0.7 percent. American manufacturers have seen a resurgence in 2017, aided by strong demand at home and the best global economy in years.

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August FHFA House Price Index up 0.7 percent from August and 6.6 percent year-on-year

The FHFA House Price Index (HPI) reported a 0.7 percent increase in U.S. house prices in August from the previous month. From August 2016 to August 2017, house prices were up 6.6 percent.

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September new home sales rebounded strongly to nearly a 10-year high

Sales of new single-family houses in September 2017 were at a seasonally adjusted annual rate of 667,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 18.9 percent above the revised August rate of 561,000 and is 17.0 percent above the September 2016 estimate of 570,000.

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Tuesday, October 24, 2017

October Markit PMI Index indicates strong private sector expansion

The seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index rose to 55.7 in October, from 54.8 in September.  This October data indicated a robust and accelerated expansion of U.S. private sector business activity. The upturn was supported by the fastest rise in manufacturing production for eight months, alongside another robust increase in service sector output.

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Monday, October 23, 2017

Chicago Fed's National Activity Index improved strongly in September

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) moved up to +0.17 in September from -0.37 in August. The index's three-month moving average, CFNAI-MA3,was unchanged at -0.16 in September.

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Friday, October 20, 2017

September existing home sales up 0.7 percent from August but down 1.5 percent year-on-year

After three straight monthly declines, existing-home sales slightly reversed course in September and rose by 0.7 percent, but ongoing supply shortages and recent hurricanes muted overall activity and caused sales to fall back on an annual basis, falling by 1.5 percent.

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Thursday, October 19, 2017

Less than one week left to register for the 8th annual Inland Empire Economic and Forecast Conference on 10/25/17


It's less than one week away!

The Housing Chronicles Blog and MetroIntelligence are pleased to partner as a sponsor with the UC Riverside School of Business' Center for Economic Forecasting & Development for their next economic conference on October 25, 2017 in Riverside, CA.

Entitled "Urban Inland Empire: California's Next Metropolis? Re-Imagining Economic Growth in the IE," this afternoon-long program will bring together economists, elected officials and academics.

Click here to register and save $25! You can also key in the code mrea17 at check-out to receive this discount.

What you can expect from this conference:

The Inland Empire is different from similarly sized markets like Atlanta and Houston in a critical way. It has no central downtown or 'urban core' where jobs are densely located.
  • What does this dynamic mean for business creation and economic development in the region?
  • Is the creation of an urban core the way to develop and grow the local economy?
  • Would an urban core appeal more to new businesses and do more to expand current ones?

Join some of the state's leading experts for a new economic forecast and a data-driven discussion about the region's urban future. 


Click here to register and save $25! You can also key in the code mrea17 at check-out to receive this discount.

Initial unemployment claims fall to lowest level since March 1973 in most recent report

In the week ending October 14, initial unemployment claims were 222,000, a decrease of 22,000 from the previous week's revised level. This is the lowest level for initial claims since March 31, 1973 when it was 222,000. The 4-week moving average was 248,250, a decrease of 9,500 from the previous week's revised average.

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Mortgage applications rise 3.6 percent in latest survey

The Market Composite Index increased 3.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 4 percent and refinances up 3 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.14 percent.

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October Philadephia Fed's Manufacturing Business Outlook Survey rises to highest level since May

The index for current manufacturing activity in the region increased 4 points to a reading of 27.9 and is now at its highest reading since May. The indexes assessing the six-month outlook suggest that firms remained optimistic about future growth.

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October Empire State Manufacturing Survey index rises to highest level in three years

The headline general business conditions index climbed six points to 30.2, its highest level in three years.Indexes assessing the six-month outlook suggested that firms remained optimistic about future conditions.

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Fed's September Beige Book: Continued overall growth even with hurricane impacts

Reports from all 12 Federal Reserve Districts indicated that economic activity increased in September through early October, with the pace of growth split between modest and moderate. Residential construction continued to increase, and growth in commercial construction was up slightly on balance. Low home inventory levels continued to constrain residential sales in many areas, while nonresidential real estate activity increased slightly overall.

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Leading Economic Index dipped slightly in September, partly due to hurricanes

The US LEI declined slightly in September for the first time in the last twelve months, partly a result of the temporary impact of the recent hurricanes. The source of weakness was concentrated in labor markets and residential construction, while the majority of the LEI components continued to contribute positively.

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Wednesday, October 18, 2017

September building permits down 4.5 percent from August and 4.3 percent year-on-year

Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,215,000. This is 4.5 percent below the revised August rate of 1,272,000 (down 5.6 percent in the South) and is 4.3 percent below the September 2016 rate of 1,270,000 (down 5.3 percent in the South).

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September housing starts dipped for third month to lowest level in a year

Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,127,000. This is 4.7 percent below the revised August estimate of 1,183,000, but is 6.1 percent above the September 2016 rate of 1,062,000. This was the lowest level since September 2016 and marked the third monthly decline in starts.

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Tuesday, October 17, 2017

CoreLogic: July serious mortgage delinquency rate at 10-year low of 4.6 percent

According to CoreLogic, 4.6 percent of mortgages were in some stage of delinquency nationally (30 days or more past due including those in foreclosure) in July 2017. This represents a 0.9 percentage point year-over-year decline in the overall delinquency rate compared with July 2016 when it was 5.5 percent.

As of July 2017, the foreclosure inventory rate, which measures the share of mortgages in some stage of the foreclosure process, was 0.7 percent, down from 0.9 percent in July 2016 and the lowest since the rate was also 0.7 percent in July 2007.

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September industrial production rebounded in spite of hurricane impacts

September industrial production in the U.S. rebounded by 0.3 percent in September after two straight declines. Capacity utilization rose to 76% from 75.8% but remained below summer levels.

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Builder confidence rises to 68 in October, highest level since May

Builder confidence in the market for newly-built single-family homes rose four points to a level of 68 in October on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). This was the highest reading since May.

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Monday, October 16, 2017

October Empire State Manufacturing Survey climbs to highest level in 3 years

Business activity grew at a robust pace in New York State, according to firms responding to the October 2017 Empire State Manufacturing Survey. The headline general business conditions index climbed six points to 30.2, its highest level in three years.

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Friday, October 13, 2017

August business inventories rose 0.7 percent, largest increase in 9 months

U.S. business inventories recorded their biggest increase in nine months in August, suggesting that inventory investment could boost economic growth in the third quarter.

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October consumer sentiment surges to highest level since early 2004

Consumer sentiment surged in early October, reaching its highest level since the start of 2004. The October gain was broadly shared, occurring among all age and income subgroups and across all partisan viewpoints. The data indicate a robust outlook for consumer spending that extends the current expansion to at least mid 2018, which would mark the 2nd longest expansion since the mid 1800s.

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September retail sales jumped by 1.6 percent, highest jump since March 2015

September retail sales jumped by 1.6 percent, or the most in more than two years as motor vehicles lost to hurricanes were quickly replaced and higher prices lifted receipts at gasoline stations.

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September CPI up 0.5 percent from August and 2.2 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) rose 0.5 percent in September on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index rose 2.2 percent.

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Thursday, October 12, 2017

Study: Productivity Gains in Construction Could Dramatically Increase Outcomes and Profits

It’s easy to state the importance of the construction industry, as it provides the foundation which makes most economic trade even possible. Globally, this industry behemoth of about $10 trillion accounts for 13 percent of worldwide GDP, and employs seven percent of its workforce.  As countries continue to urbanize, the further development of megacities (and maintenance of existing buildings) is expected to boost this total spending to $15 trillion annually by 2025.

Yet according to a recent study done by the McKinsey Global Institute, due to poor productivity gains relative to other industries, there is still $1.6 trillion left on the table each year, one-third of which is in the U.S.  If captured, this productivity loss is the equivalent of meeting half of the planet’s infrastructure needs, or boosting global GDP by two percent per year.

While the productivity challenge is global in nature, it’s even worse in the United States.  While most economic sectors in the country improved their productivity by 10 to 15 times since the 1950s, McKinsey’s analysis shows construction labor productivity remaining stuck of that in the 1930s, and has steadily declined since the 1960s.  Given that the construction sector’s share of U.S. GDP ranks close to both wholesale trade and information services, any productivity gains could have an outsized impact on the overall economy.

To be sure, not all construction projects are the same, and greater efficiencies are much easier for larger industrial and infrastructure projects than they are for housing developments or subcontractors.  Yet even for infill builders in which obtaining permits often requires making unique adjustments to garner community support, productivity gains are still possible.

McKinsey identifies 10 root causes of productivity misses, including external forces such as regulation and corruption, industry dynamics including high fragmentation and misaligned incentives, and operational factors including inadequate design processes, poor project management, under-skilled labor and under-investments in digitization, innovation and capital.

From the perspective of the builder or the subcontractor, it certainly makes business sense to be planning for the next downturn, and it’s much cheaper and easier to issue layoff notices than mothball capital-intensive investments in technology and machinery.  According to the NAHB’s 2016 Cost of Doing Business Survey, responding home builders reported an average of $16.2 million in revenue and net profit margins of $1.0 million (6.4 percent) in fiscal year 2014, so expensive investments are often unrealistic.  But it’s also that industry-wide protective mindset which has contributed to annual productivity gains of just 1.0 percent over the past 20 years, versus 2.8 percent for the global economy and 3.6 percent in manufacturing.

So what are the solutions?  McKinsey has identified seven distinct areas which could benefit from embracing various best practices, which combined could increase productivity by 48 to 60 percent while also saving costs of 27 to 38 percent.  These include (1) Reshaping regulations (something now being attempted in California to boost more housing production) and increasing transparency; (2) Awarding contracts more collaboratively; (3) Rethinking design and engineering processes while encouraging more off-site manufacturing; (4) Centralizing and digitizing supply chains and purchasing departments; (5) Improving on-site construction by moving from process-based to more holistic operating systems; (6) Infusing digital technology, new materials and appropriate automation into the process; and (7) Retraining a workforce that is aging, depends largely on immigrant labor and suffers from both seasonality and cyclicality.

Here in the U.S., larger players – especially those in the public sector -- will generally be the first to strategically decide what’s best for them, but everyone should be ready for four types of disruption:  (1) Rising requirements from clients in terms of volume, time, cost, quality and sustainability; (2) More industry consolidation, greater transparency and disruptive new competitors; (3) More new technologies, materials and processes; and (4) Rising wages and potential limits on immigrant labor. 

As these trends roll out and eventually put pressure on the building industry, there are some reasonable steps suggested to make it easier.  These include a greater use of digital Building Information Modeling (BIM) to enhance transparency and collaboration; reshaping regulations in support of higher productivity; more transparency on costs across the industry; publishing performance metrics on contractors; and considering regular skills development of the existing labor force versus the reliance on low-cost, transient immigrants.

The Harvard Center for Joint Housing Studies currently projects 1.36 million new U.S. households per year between 2015 and 2025.  While the industry is projected to approach that level of starts by 2018, in August of 2017 the annualized starts rate was 1.18 million, leaving a theoretical shortfall of 180,000.