Calculated Risk

Lawler: Early Read on Existing Home Sales in June

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Early Read on Existing Home Sales in June

A brief excerpt:
From housing economist Tom Lawler:

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 3.93 million in June, down 4.4%  from May’s preliminary pace and down 4.4% from last June’s seasonally adjusted pace.

Unadjusted sales should show a materially larger YOY % decline, reflecting this June’s two fewer business days compared to last June.
There is much more in the article.

California Home Sales Down 3% SA YoY in June; 4th Look at Local Housing Markets in June

Today, in the Calculated Risk Real Estate Newsletter: California Home Sales Down 3% SA YoY in June; 4th Look at Local Housing Markets in June

A brief excerpt:
The National Association of Realtors (NAR) is scheduled to release June Existing Home Sales on Tuesday July 23rd at 10 AM ET. The early consensus is for 4.00 million SAAR, down from 4.11 million in May, and down from 4.11 million in June 2023.
...
Closed Existing Home SalesIn June, sales in these markets were down 12.7% YoY. Last month, in May, these same markets were down 0.6% year-over-year Not Seasonally Adjusted (NSA).
...
This is a year-over-year decrease NSA for these early reporting markets. However, there were two fewer working days in June 2024 compared to June 2023 (19 vs 21), so seasonally adjusted sales will be much higher than the NSA data suggests.
...
More local markets to come!
There is much more in the article.

Q2 GDP Tracking: Mid-2%

The advance estimate of 2nd quarter GDP will be released next week.

From BofA:
Our 2Q GDP tracking estimate is up two-tenths to 2.4% q/q saar since our last publication, largely due to higher-than-expected industrial production (IP) and housing starts and permits [July 18th estimate]
emphasis added
From Goldman:
We boosted our Q2 GDP tracking estimate by 0.3pp to +2.6% (qoq ar) and our Q2 domestic final sales forecast by 0.1pp to 2.2%. [July 17th estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2024 is 2.7 percent on July 17, up from 2.5 percent on July 16. After this morning's housing starts report from the US Census Bureau and industrial production report from the Federal Reserve Board of Governors, the nowcasts of second-quarter real personal consumption expenditures growth and second-quarter real gross private domestic investment growth increased from 2.1 percent and 7.7 percent, respectively, to 2.2 percent and 8.9 percent. [July 17th estimate]

Hotels: Occupancy Rate Decreased 3.7% Year-over-year

From STR: U.S. hotel results for week ending 13 July
The U.S. hotel industry reported higher performance results than the previous week but lower comparisons year over year, according to CoStar’s latest data through 13 July. ...

7-13 July 2024 (percentage change from comparable week in 2023):

Occupancy: 69.2% (-3.7%)
• Average daily rate (ADR): US$158.21 (-1.5%)
• Revenue per available room (RevPAR): US$109.51 (-5.2%)
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.
Hotel Occupancy RateClick on graph for larger image.

The red line is for 2024, blue is the median, and dashed light blue is for 2023.  Dashed purple is for 2018, the record year for hotel occupancy. 
The 4-week average of the occupancy rate is tracking just behind last year and is below the median rate for the period 2000 through 2023 (Blue).

Note: Y-axis doesn't start at zero to better show the seasonal change.
The 4-week average of the occupancy rate will increase seasonally due to summer recreational travel.  So far, the summer leisure travel season has disappointed.

Realtor.com Reports Active Inventory Up 35.8% YoY

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For June, Realtor.com reported inventory was up 36.7% YoY, but still down 32.4% compared to April 2017 to 2019 levels. 
 Now - on a weekly basis - inventory is up 35.8% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending July 13, 2024
Active inventory increased, with for-sale homes 35.8% above year-ago levels.

For the 36th week in a row, the number of for-sale homes grew compared with one year ago. This past week, the inventory of homes for sale grew by 35.8% compared with last year, slightly higher than the rate observed in the previous week. Despite nearly 8 months of building inventory, buyers still see more than 30% fewer homes for sale compared with pre-pandemic.

New listings–a measure of sellers putting homes up for sale–were up this week by 8.8% from one year ago.

This week marks 14 out of the past 15 weeks with new listings growth and at 8.8% year-over-year it is slightly above the 2024 weekly average of 8.7%. However, the share of active listings comprising new listings fell from the same last year by just under a percentage point. While newly listed homes increased by 6.3% annually in June, this rate is roughly half of what it was two months ago. Broadly speaking, the number of new homes for sale remains historically low and is still below the 2017-2022 levels, even with recent improvements.
Realtor YoY Active ListingsHere is a graph of the year-over-year change in inventory according to realtor.com

Inventory was up year-over-year for the 36th consecutive week.  
However, inventory is still historically low.
New listings remain below typical pre-pandemic levels.

LA Port Traffic Increased Year-over-year in June

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12-month average.

LA Area Port TrafficClick on graph for larger image.

On a rolling 12-month basis, inbound traffic increased 1.7% in June compared to the rolling 12 months ending in May.   Outbound traffic increased 0.7% compared to the rolling 12 months ending the previous month.
The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

LA Area Port TrafficUsually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in the Winter depending on the timing of the Chinese New Year.  
Imports were up 20% YoY in June, and exports were up 9% YoY.    
In general, it appears port traffic is returning to the pre-pandemic patterns.

Weekly Initial Unemployment Claims Increase to 243,000

The DOL reported:
In the week ending July 13, the advance figure for seasonally adjusted initial claims was 243,000, an increase of 20,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 222,000 to 223,000. The 4-week moving average was 234,750, an increase of 1,000 from the previous week's revised average. The previous week's average was revised up by 250 from 233,500 to 233,750.
emphasis added
The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 234,750.

The previous week was revised up.

Weekly claims were higher than the consensus forecast.

Thursday: Unemployment Claims, Philly Fed Mfg

Mortgage Rates Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 228 thousand initial claims, up from 222 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for July. The consensus is for a reading of 2.9, up from 1.0.

Fed's Beige Book: "Slight to modest pace of growth"

Fed's Beige Book
Economic activity maintained a slight to modest pace of growth in a majority of Districts this reporting cycle. However, while seven Districts reported some level of increase in activity, five noted flat or declining activity—three more than in the prior reporting period. Wages continued to grow at a modest to moderate pace in most Districts, while prices were generally reported to have risen modestly. Household spending was little changed this period according to most District banks. Auto sales varied across Districts this cycle, but some Districts noted that sales were lower due in part to a cyberattack on dealerships and high interest rates. Most Districts saw soft demand for consumer and business loans. Reports on residential and commercial real estate markets varied, but most banks reported only slight changes, if any, in recent weeks. Travel and tourism grew steadily and was on par with seasonal expectations. Agricultural conditions varied in tandem with sporadic droughts across the nation. Districts also reported widely disparate trends in manufacturing activity ranging from brisk downturn to moderate growth. Retail restocking spurred slight growth in transportation activity. Meanwhile, tight capacity in ocean shipping led to a surge in spot rates. Expectations for the future of the economy were for slower growth over the next six months due to uncertainty around the upcoming election, domestic policy, geopolitical conflict, and inflation.

Labor Markets

On balance, employment rose at a slight pace in the most recent reporting period. Most Districts reported employment was flat or up slightly, while a few Districts reported modest employment growth. Several Districts reported declines in employment in the manufacturing sector due to slowdowns in new orders. Skilled-worker availability remained a challenge across all Districts; however, several Districts reported some improvement in labor supply conditions. Additionally, labor turnover was lower, which reduced demand to find new workers. Looking ahead, contacts in several Districts expect to be more selective on who they hire and not backfill all open positions. Wages grew at a modest to moderate pace in most Districts. However, several Districts reported some slowing of wage growth due to increased worker availability and less competition for workers.

Prices

Prices increased at a modest pace overall, with a couple Districts noting only slight increases.
emphasis added

Single Family Starts Up Year-over-year in June; Multi-Family Starts Down 23% YoY

Today, in the Calculated Risk Real Estate Newsletter: Single Family Starts Up Year-over-year in June; Multi-Family Starts Down 23% YoY

A brief excerpt:
Total housing starts in June were above expectations and starts in April and May were revised up.

The third graph shows the month-to-month comparison for total starts between 2023 (blue) and 2024 (red).

Starts 2023 vs 2024Total starts were down 4.4% in June compared to June 2023.

The YoY decline in total starts was due to the sharp YoY decrease in multi-family starts. Single family starts have been up YoY for 12 consecutive months.
There is much more in the article.

Industrial Production Increased 0.6% in June

From the Fed: Industrial Production and Capacity Utilization
Industrial production rose 0.6 percent in June after advancing 0.9 percent in May. For the second quarter as a whole, industrial production increased at an annual rate of 4.3 percent. Manufacturing output moved up 0.4 percent in June and rose 3.4 percent (annual rate) in the second quarter. In June, the indexes for mining and utilities posted gains of 0.3 percent and 2.8 percent, respectively. At 104 percent of its 2017 average, total industrial production in June was 1.6 percent above its year-earlier level. Capacity utilization moved up to 78.8 percent in June, a rate that is 0.9 percentage point below its long-run (1972–2023) average.
emphasis added
Capacity UtilizationClick on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).

Capacity utilization at 78.8% is 0.9% below the average from 1972 to 2022.  This was above consensus expectations.

Note: y-axis doesn't start at zero to better show the change.

Industrial Production The second graph shows industrial production since 1967.

Industrial production increased to 104.0. This is above the pre-pandemic level.

Industrial production was above consensus expectations.

Housing Starts Increased to 1.353 million Annual Rate in June

From the Census Bureau: Permits, Starts and Completions
Housing Starts:
Privately-owned housing starts in June were at a seasonally adjusted annual rate of 1,353,000. This is 3.0 percent above the revised May estimate of 1,314,000, but is 4.4 percent below the June 2023 rate of 1,415,000. Single-family housing starts in June were at a rate of 980,000; this is 2.2 percent below the revised May figure of 1,002,000. The June rate for units in buildings with five units or more was 360,000.

Building Permits:
Privately-owned housing units authorized by building permits in June were at a seasonally adjusted annual rate of 1,446,000. This is 3.4 percent above the revised May rate of 1,399,000, but is 3.1 percent below the June 2023 rate of 1,493,000. Single-family authorizations in June were at a rate of 934,000; this is 2.3 percent below the revised May figure of 956,000. Authorizations of units in buildings with five units or more were at a rate of 460,000 in June.
emphasis added
Multi Housing Starts and Single Family Housing StartsClick on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) increased in June compared to May.   Multi-family starts were down 23.1% year-over-year.

Single-family starts (red) decreased in June and were up 5.4% year-over-year.

Multi Housing Starts and Single Family Housing StartsThe second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery - and the recent collapse and recovery in single-family starts.

Total housing starts in June were above expectations, and starts in April and May were revised up.

I'll have more later …

MBA: Mortgage Applications Increased in Weekly Survey

From the MBA: Mortgage Applications Increase in Latest MBA Weekly Survey
Mortgage applications increased 3.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending July 12, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 3.9 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 30 percent compared with the previous week. The Refinance Index increased 15 percent from the previous week and was 37 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index increased 22 percent compared with the previous week and was 14 percent lower than the same week one year ago.

“Mortgage rates declined last week, as recent signs of cooling inflation and the increased likelihood of Fed rate cuts later this year pulled them lower. The 30-year fixed rate declined to 6.87 percent, the lowest rate since March 2024,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Application activity was up 4 percent, driven by a 15 percent jump in refinances to the highest level since August 2022. While FHA and VA refinance applications accounted for a significant share of the increase, these are likely recently originated loans with even higher than current offered rates. Even with last week’s rate decline, purchase applications continue to lag, down 14 percent compared to last year’s pace.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) decreased to 6.87 percent from 7.00 percent, with points decreasing to 0.57 from 0.60 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Purchase IndexClick on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is down 14% year-over-year unadjusted.  
Red is a four-week average (blue is weekly).  
Purchase application activity is up slightly from the lows in late October 2023, but still below the lowest levels during the housing bust.  

Mortgage Refinance IndexThe second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022, and mostly flat lined since then with some increase recently.

Wednesday: Housing Starts, Industrial Production, Beige Book

Mortgage Rates Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Wednesday:
• At 7:00 AM ET, The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

• At 8:30 AM, Housing Starts for June. The consensus is for 1.310 million SAAR, up from 1.277 million SAAR in May.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for June. The consensus is for a 0.3% increase in Industrial Production, and for Capacity Utilization to increase to 78.6%.

• At 2:00 PM, the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

3rd Look at Local Housing Markets in June

Today, in the Calculated Risk Real Estate Newsletter: 3rd Look at Local Housing Markets in June

A brief excerpt:
NOTE: The tables for active listings, new listings and closed sales all include a comparison to June 2019 for each local market (some 2019 data is not available).

This is the third look at several local markets in June. I’m tracking over 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in June were mostly for contracts signed in April and May when 30-year mortgage rates averaged 6.99% and 7.06%, respectively (Freddie Mac PMMS). May was the first month since last Fall with average 30-year mortgage rates over 7%.
...
Closed Existing Home SalesIn June, sales in these markets were down 12.5% YoY. Last month, in May, these same markets were down 1.0% year-over-year Not Seasonally Adjusted (NSA).
...
This is a year-over-year decrease NSA for these early reporting markets. However, there were two fewer working days in June 2024 compared to June 2023 (19 vs 21), so seasonally adjusted sales will be much higher than the NSA data suggests.
...
More local markets to come!
There is much more in the article.

NAHB: Builder Confidence Declined in July

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 42, down from 43 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: High Mortgage Rates Continue to Hold Back Builder Confidence
Mortgage rates that averaged 6.92% in June per Freddie Mac, along with elevated rates for construction and development loans, continue to put a damper on builder sentiment.

Builder confidence in the market for newly built single-family homes was 42 in July, down one point from June, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the lowest reading since December 2023.

“While buyers appear to be waiting for lower interest rates, the six-month sales expectation for builders moved higher, indicating that builders expect mortgage rates to edge lower later this year as inflation data are showing signs of easing,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan.

“Though inflation is still above the Federal Reserve’s target of 2%, it appears to be back on a cooling trend. NAHB is forecasting Fed rate reductions to begin at the end of this year, and this action will lower interest rates for home buyers, builders and developers,” said NAHB Chief Economist Robert Dietz. “And while home inventory is increasing, total market inventory remains lean at a 4.4 months’ supply, indicating a long-run need for more home construction.”

The July HMI survey also revealed that 31% of builders cut home prices to bolster sales in July, above the June rate of 29%. However, the average price reduction in July held steady at 6% for the 13th straight month. Meanwhile, the use of sales incentives held steady at 61% in July, the same reading as June.
...
The HMI index charting current sales conditions in July fell one point to 47 and the gauge charting traffic of prospective buyers also declined by a single-point to 27. The component measuring sales expectations in the next six months increased one point to 48.

Looking at the three-month moving averages for regional HMI scores, the Northeast fell six points to 56, the Midwest dropped four points to 43, the South decreased two points to 44 and the West posted a four-point decline to 37.
emphasis added
NAHB HMI Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was slightly below the consensus forecast.