The Housing Chronicles Blog: 2018

Thursday, November 29, 2018

Personal income rose 0.5 percent in October vs. 0.6 percent rise in personal spending

Both personal and disposable income rose 0.5 percent in October, versus a rise of 0.6 percent for personal spending, resulting in the personal savings rate slipping to 6.2 percent.

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October Pending Home Sales Index down 2.6 percent from September and 6.7 percent year-on-year

The Pending Home Sales Index  decreased 2.6 percent to 102.1 in October, down from 104.8 in September. Year-over-year contract signings dropped 6.7 percent, making this the tenth straight month of annual decreases.

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October PCE Price Index up 0.2 percent from September and 2.0 percent year-on-year

The Fed-preferred October PCE price index increased 0.2 percent from September, and 2.0 percent year-on-year. Excluding food and energy, the PCE price index increased 0.1 percent from September and 1.8 percent year-on-year.

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Wednesday, November 28, 2018

Mortgage applications rebound 5.5 percent as fixed rates slip four basis points

The Market Composite Index increased 5.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 9.0 percent and refinance activity up 1.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 5.12 percent from 5.16 percent.

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October new home sales declined 8.9 percent from September and 12.0 percent year-on-year

Sales of new single-family houses in October 2018 fell 8.9 percent from September and 12.0 percent year-on-year to the lowest rate in nearly three years, or an annualized rate of 544,000 units.  Meanwhile, inventory rose to 7.4 months, the highest level in 7.5 years.

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Monday, November 26, 2018

November private sector output index dips to 54.4, but still well in positive territory

The IHS Markit Flash U.S. Composite PMI Output Index registered 54.4 in November, down from
54.9 in October but still well above the 50.0 no-change threshold.

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October Leading Economic Index up slightly, but pace of improvement slower

The US Leading Economic Index (LEI) increased slightly in October, but the pace of improvement slowed for the first time since May. Although the index still points to robust economic growth in early 2019, the rapid pace of growth noted for much of 2018 may already have peaked.

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Thursday, November 15, 2018

October Home Purchase Sentiment Index dipped 2.0 points to 85.7

The Fannie Mae Home Purchase Sentiment Index® (HPSI) decreased in October, falling 2.0 points to 85.7, continuing its recent downward trend. The decline can be attributed to decreases in five of the six components, including those measuring consumers' home buying and selling attitudes.

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October retail sales rebound 0.8 percent from September and 4.6 percent year-on-year

Retail sales rebounded sharply in October, following two months of small declines.  Advance estimates of U.S. retail and food services sales for October 2018 were $511.5 billion, an increase of 0.8 percent from the previous month, and 4.6 percent above October 2017.

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Wednesday, November 14, 2018

October CPI jumped up 0.3 percent, rose 2.5 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.3 percent in October, the largest increase in nine months.  Over the last 12 months, the all-items index rose 2.5 percent before seasonal adjustment.

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Mortgage applications fall to lowest level since December 2014 in weekly update

The Market Composite Index decreased 4.0 percent on a seasonally adjusted basis from one week earlier to the lowest level since December 2014, with purchase loans falling 5.0 percent and refinance activity down 3.0 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.15 percent from 5.11 percent.

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Monday, November 12, 2018

CoreLogic: Home price growth slowing, thru September up 5.6 percent year-on-year

According to CoreLogic, national home prices increased 5.6 percent year over year in September 2018, and are forecast to increase 4.7 percent from September 2018 to September 2019. The September HPI gain was the slowest year-over-year gain since January 2017. An analysis of the market by price tiers indicates that lower-priced homes experienced significantly higher gains.

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Producer Price index jumped 0.6 percent in October, up 2.9 percent year-on-year

The Producer Price Index for final demand rose 0.6 percent in October, a sharp increase from September (0.2 percent) and August (0.1 percent).On an unadjusted basis, the final demand index increased 2.9 percent for the 12 months ended in October.

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Saturday, November 10, 2018

2018 in Review: A Stronger Economy vs. a Slowing Housing Market

About this same time a year ago, I wrote about an economy which was gradually building enough strength to spark inflation, thus impacting costs for suitable land, labor and materials.  Following that, the tax cuts enacted at the beginning of 2018 have certainly turbo-charged an already improving economy, resulting in robust consumer confidence, more job openings than candidates to fill them, and the lowest unemployment rate in nearly 50 years.

For the housing market, however, rising interest rates, lack of inventory and high prices have definitely conspired to slow sales for both new and existing homes.

U.S. GDP growth, which averaged 2.3 percent in 2017, surged to 4.2 percent by the second quarter of 2018, slipping to a still-strong advance estimate of 3.5 percent during the third quarter.  Notably, it was increasing consumer spending during the third quarter which made up for a slowdown in business investment. Still, current forecasts are suggesting this rate of growth to fall below 3.0 percent during the final quarter of the year.

Job growth, which rose by 250,000 in October, averaged 212,500 per month through the first ten months of 2017 (up 18.3 percent from the same period of 2017), with much of that growth noted in the fields of construction, manufacturing, health care and professional services.  In addition, October’s official unemployment rate of 3.7 percent is the lowest reported since mid-1969.

Not surprisingly, as of the end of September, the number of unfilled jobs was nearly 18 percent higher than the number of officially unemployed persons, which is the primary reason we’re starting to see more wage inflation of close to 3.0 percent per year.

Speaking of inflation, the Federal Reserve has been keeping it mostly in check so far in 2018 with three rate hikes, and a fourth planned for December.  However, given that the Producer Price Index – which tracks wholesale input prices – jumped by 0.6 percent in October (or three times what was forecast), the odds for that fourth rate hike have certainly increased.

Still, the Consumer Price Index remains fairly tame, rising by 2.3 percent year-on-year through September versus 2.1 percent in 2017.  Moreover, the annual increase in the Fed-preferred PCE Price Index has been trending lower since the summer months, falling to 2.0 percent by September.

Consumer confidence has also helped prop up the economy in 2018, with the University of Michigan’s widely watched sentiment index remaining at its highest year-to-date level since 2000.  Even stock market volatility, inflation and polarized politics have done little to dent consumer confidence, with consumers feeling flush enough to tap their savings or borrow money to fund their purchases.

Nonetheless, a booming economy with rising inflation and home prices often takes an eventual toll on the housing market.  Although builder confidence remained strong at 68 in October, building permits took a breather in September, slipping slightly from both the previous month and the same month of 2017.  September housing starts also dipped moderately from August, but were up 3.7 percent year-on-year.

Yet it was September’s preliminary new home sales which dropped the most, falling 13.2 percent year-on-year to the lowest level in nearly two years as the months of supply jumped to 7.1 months, the highest since March of 2011.  However, since this data is regularly revised, it’s possible that new home sales have merely flattened out in line with building permits.

In its own survey, the Mortgage Bankers Association showed September new home mortgage applications up 8.2 percent year-over-year, and year-to-date sales for 2018 were still up 3.1 percent versus 2017.

For existing homes, a combination of low inventory for starter homes and higher interest rates helped drive down September sales down 4.1 percent year-on-year, for the lowest annual sales rate since November 2015.

Unsold inventory rose slightly to a 4.4-month supply, up from 4.2 months a year ago, while the median sales price rose 4.2 percent, for the 79th straight month of year-on-year gains. Although September pending home sales did rise slightly from August, they were still down 1.0 percent year-on-year, and have fallen on an annual basis for nine consecutive months.

Another indicator of affordability, the NAHB/Wells Fargo Housing Opportunity Index, fell to 56.4 percent in the third quarter of 2018, for the lowest rate since the same quarter of 2008, and down sharply from the last peak of 77.5 in 1Q 2012.  Consequently, in the months ahead, look for more affordable supply and rising wages to counteract higher interest rates in order to keep the housing market humming.

Friday, November 9, 2018

Fed: Keep interest rates at current levels for now

Information received since the Federal Open Market Committee met in September indicates that the labor market has continued to strengthen and that economic activity has been rising at a strong rate.  On a 12-month basis, both overall inflation and inflation for items other than food and energy remain near 2 percent.  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 2 to 2-1/4 percent.

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Wednesday, November 7, 2018

Mortgage applications fall 4.0 percent, average 30-year rates rise to 5.15 percent

The Market Composite Index decreased 4.0 percent on a seasonally adjusted basis from one week earlier, to the lowest level since December 2014, with purchase loans down 5.0 percent and refinance activity falling 3.0 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances increased to 5.15 percent from 5.11 percent.

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Tuesday, November 6, 2018

JOLTS: September job openings fell 3.9 percent but still exceeded new hires

The number of job openings decreased 3.9 percent to 7.0 million on the last business day of September. Over the month, hires fell 2.7 percent to 5.7 million, and separations fell 1.9 percent, also to 5.7 million.

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Monday, November 5, 2018

3Q 2018 productivity up 2.2 percent from 2Q and 1.3 percent year-on-year

Nonfarm business sector labor productivity increased 2.2 percent during the third quarter of 2018, as output increased 4.1 percent and hours worked increased 1.8 percent. From the third quarter of 2017 to the third quarter of 2018, productivity increased 1.3 percent, reflecting a 3.7-percent increase in
output and a 2.4-percent increase in hours worked.

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Friday, November 2, 2018

October job growth rose to 250,000, unemployment rate unchanged at 3.7 percent

October nonfarm payroll employment rose by 250,000 -- far higher than estimates -- and the unemployment rate was unchanged at 3.7 percent. Wage gains also grew at their highest level since 2009, up 3.1 percent year-on-year.

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Thursday, November 1, 2018

Mortgage applications dip 2.5 percent, rates unchanged at 5.11 percent in weekly update

The Market Composite Index decreased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 2.0 percent and refinance activity down 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 5.11 percent.

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ADP: Private sector job growth rose to 227,000 in October


Private-sector employment increased by 227,000 in October, on a seasonally adjusted basis.  This growth rate compares with 218,000 in September and 161,000 in October of 2017.


October planned job cuts up sharply due to Verizon buyouts

U.S.-based employers announced plans to cut 75,644 jobs from their payrolls in October, up 36.8 percent from September and 153.6 percent higher year-on-year, although 58.2 percent of these cuts were for a single employer, Verizon. October job cuts are the highest since July 2015, when 105,696 cuts were announced, but YTD job cuts are still up just 5.5 percent from 2017.

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September construction spending flat from August, up 7.2 percent year-on-year

Construction spending was flat in September following an upwardly revised 0.8 percent jump in August (up from 0.1 percent). Construction spending increased 7.2 percent on a year-on-year basis.

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Thursday, September 20, 2018

August new home mortgage applications fell 4.6 percent from July, down 2.0 percent year-on-year

Mortgage applications for new home purchases decreased 4.6 percent compared to August 2017. Compared to July 2018, applications decreased by two percent.

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August Leading Economic Index rose to highest level in over 12 years

The Conference Board Leading Economic Index® (LEI) for the U.S. increased 0.4 percent in August to 111.2 (2016 = 100), following a 0.7 percent increase in July, and a 0.5 percent increase in June.
The leading economic index is now well above its previous peak (March 2006, 102.4).

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August existing home sales steady after four months of decline

Existing-home sales remained steady in August at 5.34 million units per year after four straight months of decline.  Sales were still down 1.5 percent year-on-year.

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Bloomberg: Consumer comfort index rises to fresh 17-year high in weekly survey


Bloomberg: Consumer comfort advanced last week to a fresh 17-year high of 60.2 on brighter views of the economy.  In addition, the gauge tracking views of economy also rose to a new a 17-year high, climbing to 64.3 from 62.0.  The measure of buying climate climbed to 52.5, highest since September 2000, and the monthly economic expectations index rose to 57.5 in September, the highest since March 2002.


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Wednesday, September 19, 2018

Join us for the 2018 Inland Empire Economic Forecast on 10/11/18!


MetroIntelligence is pleased to be a sponsor for the 2018 Inland Empire Economic Forecast taking place on Thursday, October 11th in Riverside, CA.

Click here to register:  https://lnkd.in/eK25sXE

It's been a decade since the U.S. fell into the worst economic downturn of the modern age. The Great Recession was especially ‘great’ in the Inland Empire where the damage inflicted was among the worst in the nation and came at a time of unprecedented expansion locally. Today, propelled by one of the fastest growing populations in the state, the region has largely put this painful episode behind it as unemployment has fallen to record-low levels, incomes are rising, and the housing market is picking up ever greater steam.

Get answers to these questions and more:
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  • Are the same conditions that led to the recession beginning to form again? What signals should we watch for?
  • What are the greatest threats to today’s prosperity?
  • What are the best opportunities and how can you take advantage of them?


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September builder confidence holds steady at 67

Builder confidence remained steady at 67 in September on the NAHB's Housing Market Index. Current sales conditions rose one point to 74, six-month expectations increased two points to 74, and buyer traffic remained unchanged at 49.

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August building permits dip 5.7 percent from July, down 5.5 percent year-on-year

Privately-owned housing units authorized by building permits in August were at a seasonally adjusted annual rate of 1,229,000. This is 5.7 percent below the revised July rate of 1,303,000 and is 5.5 percent below the August 2017 rate of 1,300,000.

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August housing starts rebound 9.2 percent from July and 9.4 percent year-on-year

Privately-owned housing starts in August were at a seasonally adjusted annual rate of 1,282,000. This is 9.2 percent above the revised July estimate of 1,174,000 and is 9.4 percent above the August 2017 rate of 1,172,000.

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Friday, September 14, 2018

July business inventories up 0.6 percent from June and 4.3 percent year-on-year

July business inventories increased 0.6 percent after edging up 0.1 percent in June and boosted by a strong increase in the stock of motor vehicles.  Year-on-year inventories rose 4.3 percent.

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August industrial production rose for third straight month, up 4.9 percent year-on-year

Industrial production rose 0.4 percent in August for its third consecutive monthly increase. Manufacturing output moved up 0.2 percent on the strength of a 4.0 percent rise for motor vehicles and parts. At 108.2 percent of its 2012 average, total industrial production was 4.9 percent higher in August than it was a year earlier. Capacity utilization for the industrial sector moved up in August to
78.1 percent, a rate that is 1.7 percentage points below its long-run (1972-2017) average.

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Consumer sentiment rose strongly to near-record level in early September survey

Consumer sentiment rose strongly in an early September read to 100.8, the second-highest level since 2004, and only behind the March 2018 reading of 101.4. These gains were also widespread across all major socioeconomic subgroups.

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August retail sales edged up 0.1 percent as shoppers took a break

Retail sales edged up 0.1 percent in August, the smallest rise since February.   Still, data for July was revised higher to show sales rising 0.7 percent instead of the previously reported 0.5 percent gain.

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Wednesday, September 12, 2018

The Evolution of the Master-Planned Community

It wasn’t too long ago when the typical master-planned community was mostly a collection of separate subdivisions selling under a shared branded location, with some homes wrapped around a golf course or a water feature in order to offer views (and premiums).

If there was a retail component, it was generally located on the periphery, requiring residents on various cul-de-sacs to drive for even the shortest errand.  When people went out for walks, it was generally along paved sidewalks adjacent to neighborhood streets, and did little to encourage interaction among the residents.

Today, however, the typical master-planned community developer has replaced the golf course with open space and trails, created nostalgic town centers within walking distance of each home, and started producing regular events in order to foster more interaction among those who live there.

Somewhat ironically, it was the Great Recession, the housing bust and recovery which allowed many developers the luxury of time to re-think what a modern master-planned community could be. This time period also coincided with the aging of the millennial generation into their household-forming years, with many of them opting for novel and creative experiences, versus simply demanding more living space and a higher bedroom count.

Consequently, today’s most successful master plans focus on promoting a unique sense of place, with the actual living space sometimes almost viewed as a secondary consideration.

Another major change was greater product segmentation, with a few traditional single-family subdivisions of various home and lot sizes giving way to higher-density, single-family and multi-family options, both for younger residents as well as downsizing seniors wanting to live close to family and friends.  In some cases, today’s build-to-rent homes will eventually be converted for sale at the appropriate time, thus encouraging new renters to start developing local roots now instead of later.

Yet when bumping up against unyielding costs for land and improvements, developing an experiential community with ample open space alongside a wide mix of products creates its own mix of challenges to the bottom line.

Explains Tom Martin, Senior VP, Community Development of Newport Pacific Land Company, “I would say that our focus is not only on good place making and planning, but also on innovative products such as homes on small lots, cluster detached homes and townhomes.  This allows us to increase attainability thru density while achieving an acceptable residual to the land.”

In some cases, good place making can incorporate a common theme to be used throughout the community.

At the 199-acre Sterling Meadows master plan near Sacramento, CA, developer The True Life Companies chose music as a connector, especially at its 13.7-acre main park.

In addition to interior pathways designed to resemble a treble cleft (essential to reading music), musical notes and symbols are inlaid into the pavement on pathways, in plazas and in water play areas.  Even the community’s street names are tied to music, with the exception of one key street, which is named for a fallen military veteran of the local community.

In other cases, ensuring that the community blends into the surrounding environment is critical.  At the 1,600-acre Tesoro Viejo master plan north of Fresno, CA, views of the nearby Sierra Nevada foothills are given center stage, with one-quarter of the land allocated for natural open space, parks, areas for recreation and miles of trails. For community interaction, a resort-style clubhouse, amphitheater and large event lawn will be able to host a variety of live events.

The tradition-oriented Town Center, modeled after a typical small town’s Main Street, will include new stations for fire and police protection as well as the Welcome Center. Dubbed “The Hub,” the center will include a neighborhood coffee bar, food options and multi-use offices for daily use long after the last home has sold.

For more built-out environments, the challenge is how to transform a large swath of land which will still appear relatively seamless when completed.  In between the downtown area and a 30-acre harbor in Honolulu, HI, Howard Hughes Corp. is re-envisioning a former center for heavy industry and commercial fishing into the environmentally friendly Ward Village.  Here, cars are given a lesser priority than pedestrians, bikes and buses, encouraging a slower pace of life.

When completed, a central plaza with a Farmer’s Market, a future light rail stop, 4,000 residential units and over one million square feet of retail and commercial space – including scores of existing businesses – will allow locals to visit some of their long-favorite haunts in a re-envisioned place.  Others will simply call it home.

September business inflation expectations remain unchanged at 2.2 percent over the next year

Firms' inflation expectations were virtually unchanged at 2.2 percent over the year ahead during the September survey.  Sales levels compared to "normal times" declined somewhat over the month. Profit margins declined as well, and year-over-year unit costs went unchanged at 2.0 percent, on average.

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July consumer credit use rose 5.1 percent, mostly due to auto and student loans

Total consumer credit rose in July to a seasonally adjusted $3.91 trillion, for an annual growth rate of 5.1 percent. Revolving credit, such as credit cards, rose only 1.5 percent per annum. Nonrevolving credit, typically auto and student loans, jumped 6.4 percent per annum.

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August Small Business Optimism Index soared to new 45-year record

The NFIB Small Business Optimism Index soared to 108.8 in August, a new record in the survey's 45-year history, topping the July 1983 highwater mark of 108. The record-breaking figure is driven by small business owners executing on the plans they've put in place due to "dramatic changes in the nation's economic policy."

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July open positions and job quitters both rose to record levels, layoffs declined slightly

More workers quit their jobs in July since January 2001, rising to 3.6 million, or 2.4 percent of the nonfarm workforce. The number of positions waiting to be filled rose to 6.94 million, or 4.4 percent of the workforce, both of which are the highest figures since this series launched in December 2000. Layoffs declined slightly to 1.65 million, or 1.1 percent of the workforce.

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August Producer Price Index dipped for first time in 18 months, up 2.8 percent year-on-year

The Producer Price Index for final demand, seasonally adjusted, declined 0.1 percent in August after no change in July.  On an unadjusted basis, the final demand index rose 2.8 percent for the 12 months ended in August.

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Friday, August 31, 2018

August Chicago PMI slipped 1.9 points from July but still up 6.9 percent year-on-year

The MNI Chicago Business Barometer slipped to a three-month low of 63.6 in August, down 1.9 points from July's 65.5.  A softening in Supplier Deliveries, Order Backlogs and Employment offset gains in Production and New Orders, driving the decline in the Barometer. However, it still sits 6.9% higher on the year and continues to signal robust business conditions.

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Final August consumer sentiment index remained subdued due to higher prices and interest rates

Although there was a small uptick in late August, consumer sentiment remained at its lowest level since January. Most of the August decline was in the Current Economic Conditions Index, which fell to its lowest level since November 2016. These results stand in sharp contrast to the recent very favorable report on growth in the national economy.

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Monday, August 27, 2018

July Chicago Fed's National Activity Index fell to +0.13 from +0.48 in June

Led by slower growth in production-related indicators, the Chicago Fed National Activity Index (CFNAI) declined to +0.13 in July from +0.48 in June. The index's three-month moving average, CFNAI-MA3, moved down to +0.05 in July from +0.20 in June.

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Thursday, August 23, 2018

2Q 2018 commercial/MF loan originations up 32.0 percent from 1Q and 4.0 percent year-on-year

According to the Mortgage Bankers Association's (MBA) Quarterly Survey of Commercial/Multifamily Mortgage Bankers Originations, second quarter 2018 commercial and multifamily mortgage loan originations were four percent higher than during the same period last year and 32 percent higher than the first quarter of 2018.

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Fed meeting minutes: More interest rate hikes, concerns about global trade disputes discussed

U.S. central bankers discussed raising interest rates soon to counter excessive economic strength but also examined how global trade disputes could batter businesses and households.

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FHFA: 2Q 2018 house prices up 1.1 percent from 1Q and 6.5 percent year-on-year

U.S. house prices rose 1.1 percent in the second quarter of 2018 and 6.5 percent from the second quarter of 2017 to the second quarter of 2018. FHFA's seasonally adjusted monthly index for June was up 0.2 percent from May.

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July new home sales dip to lowest level in nine months, but still up 12.8 percent year-on-year

Sales of new single-family houses in July 2018 were at a seasonally adjusted annual rate of 627,000, the lowest rate in nine months. This is 1.7 percent below the revised June rate of 638,000, but is 12.8 percent above the July 2017 estimate of 556,000.

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Wednesday, August 22, 2018

Mortgage applications rise 4.2 percent, rates flat at 4.81 percent

The Market Composite Index increased 4.2 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 3.0 percent and refinance activity up 6.0 percent.  The average contract interest rate for 30-year fixed-rate mortgages remained unchanged from 4.81 percent.

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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.

July CPI up 0.2 percent from June and 2.9 percent year-on-year

The July CPI rose 2.9% year-on-year, largely due to energy (+12.1%), transport (+4.0%) and shelter (+3.5%).  The 'core' index rose 2.4% year-on-year, for the highest increase in nearly 10 years.

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Thursday, August 9, 2018

Initial unemployment claims dip 6,000 in weekly report

In the week ending August 4, initial unemployment claims were 213,000, a decrease of 6,000 from the previous week's revised level. The 4-week moving average was 214,250, a decrease of 500 from
the previous week's revised average.

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Mortgage applications dip to lowest level in 2.5 years, rates remain unchanged

The Market Composite Index decreased 3.0 percent on a seasonally adjusted basis from one week earlier to its lowest level since January 2016, with purchase loans falling 2.0 percent and refinance activity down 5.0 percent. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances remained unchanged at 4.84 percent.

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Bloomberg: Consumer comfort index rises to 17-year high of 59.3 in weekly update

U.S. consumer sentiment advanced to a 17-year high of 59.3, elevated by rosier views of the economy and personal finances.  This is the highest level noted since February 2001.

READ MORE

June wholesale trade sales slipped 0.1 percent from May but up 10.2 percent year-on-year

June 2018 sales of merchant wholesalers were down 0.1 percent from May but up 10.2 percent year-on-year. Inventories were up 0.1 percent from May and 5.1 percent year-on-year.

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July Producer Price Index unchanged from June, up 3.3 percent year-on-year

The Producer Price Index for final demand was unchanged in July, seasonally adjusted, and rose 3.3 percent year-on-year. The index for final demand less foods, energy, and trade services moved up 0.3 percent in July, and was up 2.8 percent year-on-year.

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Wednesday, August 8, 2018

Consumer borrowing growth slowed in June as revolving credit use declined

Consumer borrowing slowed in June after hitting a six-month high in the prior month, but still rose at an annual rate of 3.1 percent.  Revolving credit, including credit cards, declined by 0.2% in June after rising 11.2% in May. This is the second drop in credit-card use in the past four months. Nonrevolving credit, including auto and student loans, rose 4.4% in June, and has been rising at a relatively steady pace in recent months.

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July new home mortgage applications up 0.2 percent from June and 3.6 percent year-on-year

July mortgage applications for new home purchases increased 0.2 percent from June and 3.6 percent year-on-year.  MBA estimates new single-family home sales were running at a seasonally-adjusted
annual rate of 637,000 units in July 2018, up 8.5 percent from June.

READ MORE

Tuesday, August 7, 2018

July Employment Trends Index up 5.4 percent year-on-year


The Conference Board Employment Trends Index™ (ETI) increased in July, after increasing in June. The index now stands at 109.89, up from 108.72 in June. The change represents a 5.4 percent gain in the ETI compared to a year ago.


CoreLogic: June home prices up 0.7 percent from May and 6.8 percent year-on-year

CoregLogic:  June home prices increased nationally by 0.7 percent from May and 6.8 percent year over year. Looking ahead, the CoreLogic HPI Forecast indicates that the national home-price index is projected to continue to increase by 5.1 percent over the next year.

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JOLTS: June job openings rose 0.5 percent as surplus of open positions remains

Although overall job openings were nearly flat between the final days of May and June (rising by 0.5 percent to 6.7 million), hires fell 1.67 percent while separations rose 1.53 percent. With 6.6 million unemployed persons in June (falling to 6.3 million in July), there still likely remains a surplus of open positions.

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Friday, August 3, 2018

Service sector index dips 3.4 points in July to 55.7

The NMI® registered 55.7 percent in July, which is 3.4 percentage points lower than the June reading of 59.1 percent. There has been a ‘cooling off’ in growth for the non-manufacturing sector, and tariffs and deliveries are an ongoing concern. Still, the majority of respondents remain positive about business conditions and the economy.

READ MORE

June trade deficit rose to $46.3 billion as imports rose faster than exports

The nation’s international trade deficit in goods and services increased to $46.3 billion in June from $43.2 billion in May, as exports decreased and imports increased.

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Online advertised vacancies rebounded by 170,800 in July

Online advertised vacancies increased by 170,800 to 4,651,500 in July, nearly erasing the loss of 171,633 noted for June. In July of 2017, the number of online job vacancies declined by 146,067.

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Jobs rose by 157,000 in July, unemployment rate edged down to 3.9 percent

Total nonfarm payroll employment rose by 157,000 in July, and the unemployment rate edged down  to 3.9 percent. This growth rate compares with 248,000 in June and 190,000 in July of 2017. Employment increased in professional and business services, in manufacturing, and in health care and social assistance.

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Thursday, August 2, 2018

Initial unemployment claims rise by 1,000 in weekly report

In the week ending July 28, initial unemployment claims were 218,000, an increase of 1,000 from the previous week's unrevised level of 217,000. The 4-week moving average was 214,500, a decrease of 3,500 from the previous week's unrevised average of 218,000.

READ MORE

Bloomberg: Consumer Comfort Index slips from 17-year high, but gender gap at highest level since 1990

Bloomberg: The weekly Consumer Comfort Index eased to 58.6 from a 17-year high 59 in previous week as the gender gap widened to 18.6 points in favor of men, up from 16.5 points in prior week.  This is the highest gap since 1990.

READ MORE

June factory goods orders rose 0.7 percent, up for second straight month

New orders for U.S.-made goods rose for a second straight month in June and were up by 0.7 percent, but business spending plans on equipment slipped from initial estimates, suggesting a further
slowdown was likely in the third quarter.

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July planned job cuts fall to lowest level of 2018, but YTD cuts still up 6.7 percent from 2017

U.S.-based employers announced plans to cut 27,122 workers from payrolls during July, down both 27.1 percent from June and 4.2 percent year-on-year.  Although July's total was the lowest of the year, YTD job cuts are still up 6.7 percent from 2017. Still, nearly 90 percent of companies polled are in hiring or retention mode.

READ MORE

Wednesday, August 1, 2018

ISM Manufacturing Index dips to 58.1, high concerns regarding tariffs

The July PMI® registered 58.1 percent, a decrease of 2.1 percentage points from the June reading of 60.2 percent.

Production and employment continues to expand in spite of labor and material shortages. Inputs — expressed as supplier deliveries, inventories and imports — had expansion increases, due primarily to negative supply chain issues, but at easing levels compared to the prior month. Price pressure remains strong, but the index softened for the second straight month.

Demand remains robust, but the nation’s employment resources and supply chains continue to struggle. Respondents are again overwhelmingly concerned about how tariff-related activity, including reciprocal tariffs, will continue to affect their business.

READ MORE

Mortgage applications dip 2.6 percent as rates rise to 4.84 percent


The Market Composite Index decreased 2.6 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 3.0 percent and refinances down 2.0 percent.  The average contract interest rate for 30-year fixed-rate mortgages increased to 4.84 percent from 4.77 percent.


FOMC Statement: Rates unchanged for now, but future 2018 hikes ahead

As expected, the Fed opted to keep interest rates unchanged for now, but warns of future rate hikes to come in 2018, perhaps as soon as September.

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ADP: Private Sector Employment Increased by 219,000 Jobs in July

Private-sector employment increased by 219,000 from June to July, on a seasonally adjusted basis. 
This compares to 181,000 in June and 203,000 in July of 2017.

READ MORE


June construction spending fell by largest amount in over a year, but previous months' totals revised upwards

Construction spending fell 1.1 percent in June, the largest decline since April 2017. However, data for May was revised up to show construction outlays rising 1.3 percent instead of the previously reported 0.4 percent gain, and April's outlays increased 1.7 percent instead of the previously estimated 0.9 percent.

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Tuesday, July 31, 2018

July Chicago PMI rose to six-month high, prices paid index rises to 10-year high

The MNI Chicago Business Barometer rose to a six-month high of 65.5 in July, up 1.4 points from 64.1 in June, with the prices paid index rising to a 10-year high.

READ MORE

July consumer confidence index rebounds slightly from June

Consumer confidence gained marginal ground by rising 0.3 points in July, after a modest decline in June. Consumers' assessment of present-day conditions improved, suggesting that economic growth is still strong. However, while expectations continue to reflect optimism in the short-term economic outlook, back-to-back declines suggest consumers do not foresee growth accelerating.

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June personal income and personal spending both rose 0.4 percent, savings rate unchanged

In June, personal income, disposable personal income and personal consumption expenditures all increased 0.4 percent. The personal savings rate was unchanged from May at 6.8 percent.

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Wage inflation: 2Q 2018 compensation costs rose at highest annual rate since 2008

Compensation costs for civilian workers increased 0.6 percent, seasonally adjusted, for the 3-month period ending in June 2018. Wages and salaries increased 0.5 percent and benefit costs increased 0.9 percent. Year-on-year, compensation costs rose 2.8 percent, with wages and salaries up 2.8 percent and benefits rising 2.9 percent.

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May Case-Shiller Index up 1.1 percent from April and 6.4 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 6.4% annual gain in May, remaining the same as in the previous month. Before seasonal adjustment, the National Index posted a month-over-month gain of 1.1% in May.

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Fed-preferred June PCE Price Index up 0.1 percent from May and 2.2 percent year-on-year

In June, the PCE price index increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.1 percent. Year-on-year, the PCE price Index rose 2.2 percent.  Excluding food and energy, the index rose 1.9 percent.

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Monday, July 30, 2018

July Global Investor Confidence rebounds 1.0 point to 101.8, but investor sentiment remains depressed

The Global Investor Confidence Index increased to 101.8 in July, up 1.0 point from June's revised reading of 100.8.  It is possible that the prospects of escalating trade protectionism, political uncertainty, and lagging earnings growth continue to depress institutional investor sentiment.

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Gallup: Nearly 4 in 10 of Americans cite the economy as the nation's most positive factor

According to a Gallup poll, 37 percent of respondents cited the economy or jobs as nation's biggest positive factor. This marks a 14-year high in Gallup's monthly poll series.

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June pending home sales index rebounds 0.9 percent from May, but still down 2.5 percent year-on-year

The Pending Home Sales Index rose 0.9 percent to 106.9 in June from 105.9 in May. Despite last month's increase, contract signings are still down 2.5 percent on an annual basis.

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Friday, July 27, 2018

July consumer sentiment dipped 0.3 points to 97.9, still at high levels

Consumer sentiment posted a trivial 0.3 point one-month decline in July, remaining a half of an Index-point or less from the average in the prior twelve months (97.7) or since the start of 2017 (97.4). Despite the expectation of higher inflation and higher interest rates during the year ahead, consumers have kept their confidence at high levels due to favorable job and income prospects.

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Second quarter GDP growth jumps to 4.1 percent in first of three estimates

U.S. GDP grew by 4.1 percent in the second quarter of 2018 in the first of three estimates. Most of this jump from the 2.2 percent rate noted in the first quarter was from personal spending, exports, nonresidential fixed investment, federal government spending, and state and local government spending.

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Thursday, July 26, 2018

Initial unemployment claims rise by 9,000 in weekly report

In the week ending July 21, initial unemployment claims were 217,000, an increase of 9,000 from the previous week's revised level. The 4-week moving average was 218,000, a decrease of 2,750 from the previous week's revised average.

READ MORE

Mortgage applications dip 0.2 percent, rates remain flat

The Market Composite Index decreased 0.2 percent on a seasonally adjusted basis from one week earlier, with purchase loans down 1.0 percent but refinances up 1.0 percent. The average contract interest rate for 30-year fixed-rate mortgages remained unchanged at 4.77 percent.

READ MORE

Bloomberg: Consumer confidence rises to highest level since February 2001 in weekly update

Americans' confidence rose to the highest level since February 2001 on brighter assessments of the economy, with the Bloomberg Consumer Comfort Index rising for the seventh straight week to 59.0 from 58.8.

READ MORE

June trade in goods deficit rose 5.5 percent as imports outpaced exports

The international trade deficit was $68.3 billion in June, up 5.5 percent from $64.8 billion in May. Exports of goods for June were $141.9 billion, $2.2 billion less than May exports. Imports of goods for June were $210.3 billion, $1.3 billion more than May imports.

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Durable goods orders rebounded strongly in June

Overall orders for durable goods, items meant to last three years or more, increased 1.0 percent in June as demand for transportation equipment rebounded. Excluding transportation, orders rose 1.5 percent.

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Wednesday, July 25, 2018

Direct foreign investment in the U.S. fell sharply in 1Q 2018

Net foreign direct investment in the U.S. was $53.1 billion in 1Q 2018, the first quarter in which the tax cuts took effect.  This level of investment is down 43% from the same quarter of 2017 and 37% from the fourth quarter of 2017.

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June new home sales dip to eight-month low, but still up 2.4 percent year-on-year

Sales of new single-family houses in June 2018 were at a seasonally adjusted annual rate of 631,000, the lowest rate in eight months and down 5.3 percent from May.  Still, sales were up 2.4 percent year-on-year. The median new house price fell 4.2 percent to $302,100 in June from a year ago.

READ MORE


Tuesday, July 24, 2018

FHFA: Home prices up 0.2 percent in May and 6.4 percent year-on-year


The FHFA House Price Index (HPI) reported a 0.2 percent increase in U.S. house prices in May from April.  From May 2017 to May 2018, house prices were up 6.4 percent.


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Private sector growth strong in July, but prices charged rising at record rate

U.S. private sector companies experienced a robust rise in overall business activity during July, supported by an improving economic backdrop and another sharp upturn in incoming new work. Relatively strong rates of business activity growth were recorded in both the manufacturing and service sectors.

Intense cost pressures continued in July, which resulted in a sharp and accelerated increase in average prices charged by private sector firms. The latest rise in output charges was the fastest since composite data were first collected in October 2009.

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Monday, July 23, 2018

Chicago Fed National Activity Index rebounded strongly in June

Led by improvements in production-related indicators, the Chicago Fed National Activity Index (CFNAI) rebounded to +0.43 in June from –0.45 in May. The index’s three-month moving average, CFNAI-MA3, edged up to +0.16 in June from +0.10 in May.

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June existing home sales dip for third straight month, prices rise to all-time high

Existing-home sales decreased for the third straight month in June, falling by 0.6 percent from May and down 2.2 percent year-on-year. The ongoing supply and demand imbalance helped push June’s median sales price to a new all-time high of $276,900, up 5.2 percent year-on-year.

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Thursday, July 19, 2018

Initial unemployment claims fall to lowest level since December 1969

In the week ending July 14, initial unemployment claims were 207,000, a decrease of 8,000 from the previous week's revised level. This is the lowest level for initial claims since December 6, 1969 when it was 202,000. The 4-week moving average was 220,500, a decrease of 2,750 from the previous week's revised average.

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Mortgage applications fall 2.5 percent as purchase loans slip

The Market Composite Index decreased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans falling 5.0 percent but refinances rising 2.0 percent. The average contract interest rate for 30-year fixed-rate mortgages increased to 4.77 percent from 4.76 percent.

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June Leading Economic Index rose 0.5 percent after no change in May

The U.S. LEI increased in June by 0.5 percent to 109.8 after being flat in May, pointing to continuing solid growth in the U.S. economy. The widespread growth in leading indicators, with the exception of housing permits which declined once again, does not suggest any considerable growth slowdown in the short-term.

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Wednesday, July 18, 2018

June industrial production rebounded 0.6 from May, up 3.8 percent year-on-year

Industrial production rose 0.6 percent in June after declining 0.5 percent in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0 percent, its third consecutive quarterly increase.  At 107.7 percent of its 2012 average, total industrial production was 3.8 percent higher in June than it was a year earlier.

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June building permits dip for third straight month, down 3.0 percent year-on-year

Privately-owned housing units authorized by building permits in June dipped for the third month to a seasonally adjusted annual rate of 1,273,000, which is the lowest rate since September 2017. This is also 2.2 percent below the revised May rate of 1,301,000 and is 3.0 percent below the June 2017 rate of 1,312,000.

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June housing starts dip to lowest level since September 2017, down 4.2 percent year-on-year

Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,173,000, dipping to the lowest rate since September 2017. This is 12.3 also below the revised May estimate of 1,337,000 and is 4.2 percent below the June 2017 rate of 1,225,000.

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June new home mortgage applications down 12 percent from May and 8.8 percent year-on-year

June mortgage applications for new home purchases decreased 12 percent since May and were down 8.8 percent year-on-year, but are not seasonally adjusted.  For the first six months of 2018, however, new home applications rose 2.5 percent year-on-year.

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Beige book: Expansion continuing, but tariffs impacting prices and supplies

Economic activity continued to expand across the United States, with 10 of the 12 Federal Reserve Districts reporting moderate or modest growth. The outliers were the Dallas District, which reported strong growth driven in part by the energy sector, and the St. Louis District where growth was described as slight. Manufacturers in all Districts expressed concern about tariffs and in many Districts reported higher prices and supply disruptions that they attributed to the new trade policies.

All Districts reported that labor markets were tight and many said that the inability to find workers constrained growth. Consumer spending was up in all Districts with particular strength in Dallas and Richmond. Contacts reported higher input prices and shrinking margins. Six Districts specifically mentioned trucking capacity as an issue and attributed it to a shortage of commercial drivers. Contacts in several Districts reported slow growth in existing home sales but were not overly concerned about rising interest rates. Commercial real estate was largely unchanged.

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Tuesday, July 17, 2018

June industrial production rebounded 0.6 from May, up 3.8 percent year-on-year


Industrial production rose 0.6 percent in June after declining 0.5 percent in May. For the second quarter as a whole, industrial production advanced at an annual rate of 6.0 percent, its third consecutive quarterly increase.

At 107.7 percent of its 2012 average, total industrial production was 3.8 percent higher in June than it was a year earlier. Capacity utilization for the industrial sector increased 0.3 percentage point in June to 78.0 percent, a rate that is 1.8 percentage points below its long-run (1972–2017) average.


Builder confidence unchanged at 68 in July survey

Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI). The HMI index measuring current sales conditions remained unchanged at 74. Meanwhile, the component gauging expectations in the next six months dropped two points to 73 and the metric charting buyer traffic rose two points to 52.

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Builder confidence unchanged at 68 in July survey


Builder confidence in the market for newly-built single-family homes remained unchanged at a solid 68 reading in July on the National Association of Home Builders/Wells Fargo Housing Market Index (HMI).

The HMI index measuring current sales conditions remained unchanged at 74. Meanwhile, the component gauging expectations in the next six months dropped two points to 73 and the metric charting buyer traffic rose two points to 52.

Looking at the three-month moving averages for regional HMI scores, the Northeast rose one point to 57 while the Midwest remained unchanged at 65. The West and South each fell one point to 75 and 70, respectively.


Monday, July 16, 2018

July Empire State Manufacturing Survey index dips two points to 22.6

The headline general business conditions index edged down by over two points to 22.6—still a high level, suggesting a continuation of robust growth. Looking ahead, firms were slightly less optimistic about the six-month outlook than they were last month.

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June retail sales rose 0.5 percent from May and 6.6 percent year-on-year

Retail sales increased 0.5 percent in June, for the largest gain since September 2017, and were up 6.6 percent year-on-year. Total sales for the April 2018 through June 2018 period were up 5.9 percent from the same period a year ago.

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Friday, July 13, 2018

Consumer sentiment slips in mid-July read but still at high level

Consumer sentiment slipped in early July but remained nearly equal to the average in the prior twelve months (97.7) and since the start of 2017 (97.4).  So far, the strength in jobs and incomes has overcome higher inflation and interest rates. The darkening cloud on the horizon, however, is due to rising concerns about the potential negative impact of tariffs on the domestic economy. While consumers may not understand the intricacies of trade theory, they have substantial experience making decisions about the timing of discretionary purchases based on prospective trends in prices.

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Thursday, July 12, 2018

Initial unemployment dip by 18,000 in weekly report

In the week ending July 7, initial unemployment claims were 214,000, a decrease of 18,000 from the previous week's revised level. The 4-week moving average was 223,000, a decrease of 1,750 from the previous week's revised average.

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Mortgage applications up 2.5 percent in weekly survey due to purchase loans, refinances dip

The Market Composite Index increased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 7.0 percent but refinance activity falling 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.76 percent.

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Bloomberg: Consumer comfort rose for fifth-straight week to highest level since mid-April

The Consumer Comfort Index improved for a fifth straight week, buoyed by brighter views of their personal finances and record-high confidence among Republicans. The index rose from 57.6 to 58.0, the highest reading since mid-April and matching the second-strongest reading since February 2001.

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CPI up 0.1 percent in June and 2.9 percent year-on-year

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in June and was up 2.9 percent year-on-year. The index for all items less food and energy rose 0.2 percent in June, and was up 2.3 percent year-on-year.

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Wednesday, July 11, 2018

Mortgage applications up 2.5 percent in weekly survey due to purchase loans, refinances dip

The Market Composite Index increased 2.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans rising 7.0 percent but refinance activity falling 4.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.76 percent.



Businesses' July Inflation Expectations Hold Firm for the Coming Year

Firms' inflation expectations went unchanged at 2.1 percent over the year ahead.  Sales levels remain "about normal," on average. Profit margins improved somewhat, and year-over-year unit costs decreased somewhat to 1.9 percent, on average.



Wholesale inventories rose faster than expected in May as domestic demand rose

U.S. wholesale inventories were a bit higher than initially estimated in May, rising by 0.6 percent amid strong increases in the stocks of machinery and a range of other goods. Economists expect the pace of inventory accumulation to pick up slightly in the second quarter after weak domestic demand in the first quarter.

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Producer Price Index up 0.3 percent in June and 3.4 percent year-on-year

The Producer Price Index for final demand rose 0.3 percent in June, down from 0.5 percent in May but up from 0.1 percent in April. On an unadjusted basis, the final demand index moved up 3.4 percent for the 12 months ended in June, the largest 12-month increase since climbing 3.7 percent in November 2011.

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Tuesday, July 10, 2018

The Rise of the New Single-Family Rental Home: A Hedge Against Real Estate Cycles


My column for the July edition of Builder & Developer magazine is now posted online.

An excerpt:

In September of 2015, I wrote a column about the introduction of a new product type to the home building marketplace: the single-family home for rent, otherwise known as build-to-rent (B2R). At that time, just a few builders, including Lennar and Toll Brothers, had dipped their toes into these waters, but today it’s being seen as a clever hedge against the boom-and-bust real estate cycles which can test even the best-run companies.

To be sure, it’s not just homebuilders getting into this game. Wall Street-backed companies like Invitation Homes and AmericanHomes4Rent started the trend by buying up cheap, existing single-family homes in foreclosure back in 2012 when home prices were near their lowest, eventually assembling a portfolio of 200,000 units across the country. Even with that rapid growth, their holdings still represent just 1.4 percent of the estimated 14 million single-family rental homes, with most owned by small “mom and pop” operators.


June Small Business Optimism Index dips 0.6 points but still at high level

The Small Business Optimism Index posted its sixth highest reading in survey history for the month of June, at 107.2, down 0.6 from May. Since December 2016, the Index has averaged an unprecedented 105.4, well above the 45-year average of 98 and rivaling the all-time high of 108.0 in July 1983.

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Consumer borrowing picked up in May at fastest rate in six months


Consumer borrowing picked up in May, with total consumer credit increasing at an annual growth rate of 7.6%, which is the fastest pace of credit growth since November.   Most of this was due to revolving credit, like credit cards, which rose by 11.4% in May, and indicating consumers are willing to increase their spending after a slow first quarter of the year.


JOLTS: Job openings dipped 3.0 percent in May as hiring picked up


The number of job openings edged down 3.0 percent to 6.6 million on the last business day of May. Over the month, hires rose 3.1 percent to 5.8 million, while separations rose 0.8 percent to 5.5 million.


Monday, July 9, 2018

The 2018 Gold Nugget Winners: High Art in Architecture, Design and Land Use


One of the things I like best about the building industry is the enormous creativity involved in every stage of the process, especially for decisions made about architecture, design and land use.  This was certainly true again for this year’s Gold Nugget winners at PCBC, ranging from rehabs which are both practical and inspiring, to master plans which seemed to effortlessly take the pulse of today’s culture while still making them relevant to future residents. Following are some profiles of winners in key categories.

There were actually two winners for Best Masterplan Community, divided among urban and suburban locations.  In Honolulu, Ward Village by Howard Hughes Corp. re-imagined a 60-acre parcel once known for heavy industry and commercial fishing into the largest certified LEED-ND Platinum (Neighborhood Development) project of its kind in the U.S.

In between the downtown area and the 30-acre Kewalo Harbor, 4,500 residential units, over one million square feet of retail space, a central plaza and rail station will emerge.  Best of all, by including scores of existing businesses in this redevelopment, Ward Village demonstrated clear respect for the local culture and history.

Yet it was Rancho Mission Viejo’s Esencia in Southern California which took multiple awards for not just Best Masterplan, but also Best Community Land Plan and Best Recreational Use Facility.  The true challenge here was how to best respect the terrain and ranching history of this 890-acre plan while still being able to develop nearly 2,750 homes, 60 acres of retail space and over 16 ranch-themed gathering places, clubhouses and Nature Center.

But the true selling point for Escenia was its integration into the 17,000 acres of an open space preserve, which will eventually become part of the 33,000-acre Southern Subregion Habitat Reserve, one of California’s largest.  The land plan itself was noted for retaining ranch elements including a yurt campground, oak groves, hillside trails and farming, all of which are intended to inspire future generations to respect the land.

In nearby Newport Coast, The New Home Company took top honors for Best Residential Detached Collection with Coral Canyon, an exclusive enclave of 27 homes offering canyon views with a resort feel.  Reportedly inspired by the easy pace of life on the Spanish island Ibiza, judges cited the way in which each home effortlessly blended into the next, creating a cohesive and memorable street scene characterized by neutral colors, bright interiors and flat roofs on all single-story elements.

For an individual, single-family home, it was Plan 9502 at Camelot Homes’ White Horse in Scottsdale, AZ which was named Home of the Year.  In this case, judges cited the way in which this plan updates the classic hacienda footprint into a modern feel, with numerous indoor-outdoor spaces to take advantage of the local climate.

Yet by orienting each of the 50 homes towards its center, the compounds created on these half-acre lots helped to mitigate noise from an adjacent six-lane highway.  The end result was a traditional-looking home outside that was more white-washed farmhouse inside, ultimately creating an unusually unique plan which judges noted “would set a future precedent for the evolution of production housing.”

Clever designs also abounded in the multi-family space, with Trumark Urban’s The Pacific winning Best Multi-Family Community due to what judges said was “transforming what was a detractor and neighborhood eyesore to an exemplary display of positive change.”  What Trumark was able to do was transform a mid-rise, 1960s-style school of dentistry in the middle of the upscale, built-out community of Pacific Heights in San Francisco into 76, LEED Gold-certified luxury condos and townhomes.

They did this by breaking up the previous, Brutalist exterior with a modern take on the classic bay window, repurposing a mechanical building on the roof into four penthouses with terraces, and masking the adjacent parking structure with ten, three-story townhomes. This lower elevation helped better tie the entire project into the lower-density neighborhood, while also improving the overall streetscape.

Finally, it was The Camden’s combination of 287 upscale apartments, a 40,000-square-foot Equinox health club and multiple gathering spaces to maximize socializing which earned this project by Camden Development top honors for Best Mixed-Use Project. 

Built on the site of Paramount Pictures’ first production building in the heart of Hollywood, CA, The Camden not only captures this entertainment-oriented history on a public art wall at the base of each tower, but intentionally markets its units to the young and local ‘industry’ types as not just a home, but also a very convenient place to network.

June Employment Trends Index rebounded from May, up 5.2 percent year-on-year

As expected, after decreasing in May, the Employment Trends Index continued its solid path upwards in June, with positive contributions from all of its components and rising by 5.2 percent year-over-year to 108.94. The labor market will continue to tighten in the coming months, with strong employment growth outpacing the number of people entering the labor force.

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Jobs grew by 213,000 in June, unemployment rate ticked back up to 4.0 percent

Total nonfarm payroll employment increased by 213,000 in June, and the unemployment rate rose to 4.0 percent as more job seekers came off of the sidelines. Job growth occurred in professional and business services, manufacturing, and health care, while retail trade lost jobs.

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Friday, July 6, 2018

Gallup: Percent of Americans recognizing robust job market still near record high

Americans continue to recognize a robust U.S. job market, with 65% saying that it is a good time to find a "quality job," similar to 67% in May. These are the highest readings in Gallup's 17-year history of tracking this measure of Americans' views of the employment situation.

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Thursday, July 5, 2018

OECD report discusses left-behind workers in economic growth

The Organization for Economic Cooperation and Development (OECD) has a new report out which discusses why so many workers in the U.S. feel left behind even with low unemployment and healthy GDP growth.

This is important for the future as the economy continues to transition to one using more technology and robotics. How can we include today's workers in the job markets of tomorrow?

Click here for the entire report: https://lnkd.in/gtPg8GQ

Initial unemployment claims rise by 3,000 in latest report

In the week ending June 30, initial unemployment claims were 231,000, an increase of 3,000 from the previous week's revised level. The 4-week moving average was 224,500, an increase of 2,250 from the previous week's revised average.

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Mortgage applications fall 0.5 percent in weekly report

The Market Composite Index decreased 0.5 percent on a seasonally adjusted basis from one week earlier, with purchase loans up 1.0 percent and refinances falling 2.0 percent. The average contract interest rate for 30-year fixed-rate mortgages decreased to 4.79 percent.

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Bloomberg: Consumer comfort index reaches 17-year high

Americans' sentiment approached a 17-year high last week on increasingly upbeat views of the economy and personal finances, rising to 57.6. This was the fourth consecutive weekly advance.

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June service sector economy index rises another 0.5 points to 59.1 percent

The June NMI® registered 59.1 percent, which is 0.5 percentage point higher than the May reading of 58.6 percent. There is a continuing concern relating to tariffs, capacity constraints and delivery.

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June planned job cuts up 18 percent from May and 19.6 percent year-on-year

Job cuts announced by U.S.-based employers rose 18 percent to 37,202 in June, and were up 19.6 percent year-on-year.  Although the second quarter saw 25.3 percent fewer cuts than the previous quarter, they were still up 4 percent year-on-year.

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