Calculated Risk

Housing Inventory Oct 18th Update: Inventory Down Slightly Week-over-week

Tracking existing home inventory will be very important this year.

Lumcber PricesClick on graph for larger image in graph gallery.

This inventory graph is courtesy of Altos Research.
As of October 15th, inventory was at 424 thousand (7 day average), compared to 554 thousand for the same week a year ago.  That is a decline of 23.6%.
Compared to the same week in 2019, inventory is down 55% from 936 thousand.  A week ago, inventory was at 426 thousand, and was down 23.3% YoY.   
Seasonally, inventory bottomed in April (usually inventory bottoms in January or February). Inventory was about 38% above the record low in early April.
Now inventory may have peaked for the year in early September.   Six weeks ago inventory was at 437 thousand (the peak for the year so far), so inventory is currently off about 3.1% from the peak for the year.  
Mike Simonsen discusses this data regularly on Youtube.  
Altos Research has also seen a significant pickup in price decreases - now well above the level of a year ago - but still below a normal rate for October.

NAHB: Builder Confidence Increased to 80 in October

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 80, up from 76 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Strong Demand Boosts Builder Confidence Despite Supply Chain Disruptions
Strong consumer demand helped push builder confidence higher in October despite growing affordability challenges stemming from rising material prices and shortages. Builder sentiment in the market for newly built single-family homes moved four points higher to 80 in October, according to the NAHB/Wells Fargo Housing Market Index (HMI) released today.

“Although demand and home sales remain strong, builders continue to grapple with ongoing supply chain disruptions and labor shortages that are delaying completion times and putting upward pressure on building material and home prices,” said NAHB Chairman Chuck Fowke.

“Builders are getting increasingly concerned about affordability hurdles ahead for most buyers,” said NAHB Chief Economist Robert Dietz. “Building material price increases and bottlenecks persist and interest rates are expected to rise in coming months as the Fed begins to taper its purchase of U.S. Treasuries and mortgage-backed debt. Policymakers must focus on fixing the broken supply chain. This will spur more construction and help ease upward pressure on home prices.”
...
All three major HMI indices posted gains in October. The index gauging current sales conditions rose five points to 87, the component measuring sales expectations in the next six months posted a three-point gain to 84 and the gauge charting traffic of prospective buyers moved four points higher to 65.

Looking at the three-month moving averages for regional HMI scores, the Midwest rose one point to 69, the Northeast held steady at 72, the South and West each remained unchanged at 80 and 83, respectively.
NAHB HMI Click on graph for larger image.

This graph show the NAHB index since Jan 1985.

This was above the consensus forecast, and a strong reading.

Industrial Production Decreased 1.3 Percent in September

From the Fed: Industrial Production and Capacity Utilization
Industrial production fell 1.3 percent in September after moving down 0.1 percent in August; output was previously reported to have risen 0.4 percent in August. In September, manufacturing output decreased 0.7 percent: The production of motor vehicles and parts fell 7.2 percent, as shortages of semiconductors continued to hobble operations, while factory output elsewhere declined 0.3 percent. The output of utilities dropped 3.6 percent, as demand for cooling subsided after a warmer-than-usual August. Mining production fell 2.3 percent.

The lingering effects of Hurricane Ida more than accounted for the drop in mining in September; they also contributed 0.3 percentage point to the drop in manufacturing. Overall, about 0.6 percentage point of the drop in total industrial production resulted from the impact of the hurricane.

Despite the decrease in September, total industrial production rose 4.3 percent at an annual rate for the third quarter as a whole, its fifth consecutive quarter with a gain of at least 4 percent.

At 100.0 percent of its 2017 average, total industrial production in September was 4.6 percent above its year-earlier level. Capacity utilization for the industrial sector fell 1.0 percentage point in September to 75.2 percent, a rate that is 4.4 percentage points below its long-run (1972–2020) average.
emphasis added
Capacity Utilization Click on graph for larger image.

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

Capacity utilization at 75.2% is 4.4% below the average from 1972 to 2020.  This was well below consensus expectations.

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

Industrial ProductionThe second graph shows industrial production since 1967.

Industrial production decreased in September to 100.0. This is 1.3% below the February 2020 level.

The change in industrial production was well below consensus expectations.

Seven High Frequency Indicators for the Economy

These indicators are mostly for travel and entertainment.    It will interesting to watch these sectors recover as the pandemic subsides.

----- Airlines: Transportation Security Administration -----
The TSA is providing daily travel numbers.

This data is as of October 17th.
TSA Traveler Data Click on graph for larger image.

This data shows the 7-day average of daily total traveler throughput from the TSA for 2019 (Light Blue), 2020 (Blue) and 2021 (Red).

The dashed line is the percent of 2019 for the seven day average.

The 7-day average is down 21.4% from the same day in 2019 (78.6% of 2019).  (Dashed line)
Note that the dashed line hit a pandemic high over the Labor Day weekend - probably due to leisure travel, but is now at pre-holiday levels.
Travel usually increases seasonally after Labor Day due to business travel.
----- Restaurants: OpenTable -----
The second graph shows the 7-day average of the year-over-year change in diners as tabulated by OpenTable for the US and several selected cities.
IMPORTANT: OpenTable notes: "we’ve updated the data including downloadable dataset from January 1, 2021 onward to compare seated diners from 2021 to 2019, as opposed to year over year." Thanks!

DinersThanks to OpenTable for providing this restaurant data:

This data is updated through October 16, 2021.

This data is "a sample of restaurants on the OpenTable network across all channels: online reservations, phone reservations, and walk-ins. For year-over-year comparisons by day, we compare to the same day of the week from the same week in the previous year."

Note that this data is for "only the restaurants that have chosen to reopen in a given market". Since some restaurants have not reopened, the actual year-over-year decline is worse than shown.

Dining picked up for the Labor Day weekend, but declined after the holiday - but might be picking up a little again.  The 7-day average for the US is down 8% compared to 2019.


----- Movie Tickets: Box Office Mojo -----
Move Box OfficeThis data shows domestic box office for each week and the median for the years 2016 through 2019 (dashed light blue).  
Blue is 2020 and Red is 2021.  
The data is from BoxOfficeMojo through October 14th.

Note that the data is usually noisy week-to-week and depends on when blockbusters are released.

Movie ticket sales were at $147 million last week, down about 12% from the median for the week.
----- Hotel Occupancy: STR -----
Hotel Occupancy RateThis graph shows the seasonal pattern for the hotel occupancy rate using the four week average.

The red line is for 2021, black is 2020, blue is the median, dashed purple is 2019, and dashed light blue is for 2009 (the worst year on record for hotels prior to 2020).

This data is through October 2nd. The occupancy rate was down 9.6% compared to the same week in 2019.

Notes: Y-axis doesn't start at zero to better show the seasonal change.
The Summer months had decent occupancy with solid leisure travel, and occupancy was only off about 7% in July and August compared to 2019. Usually weekly occupancy increases to around 70% in the weeks following Labor Day due to renewed business travel.   However, this year, so far, business travel has been lighter than leisure travel in 2021.
----- Gasoline Supplied: Energy Information Administration -----
gasoline ConsumptionThis graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows gasoline supplied compared to the same week of 2019.

Blue is for 2020.  Red is for 2021.

As of October 8th, gasoline supplied was down 1.8% compared to the same week in 2019.

There have been six weeks so far this year when gasoline supplied was up compared to the same week in 2019 - and consumption is running close to 2019 levels now.

----- Transit: Apple Mobility -----
This graph is from Apple mobility. From Apple: "This data is generated by counting the number of requests made to Apple Maps for directions in select countries/regions, sub-regions, and cities." This is just a general guide - people that regularly commute probably don't ask for directions.

There is also some great data on mobility from the Dallas Fed Mobility and Engagement Index. However the index is set "relative to its weekday-specific average over January–February", and is not seasonally adjusted, so we can't tell if an increase in mobility is due to recovery or just the normal increase in the Spring and Summer.

Apple Mobility DataThis data is through October 15th for the United States and several selected cities.

The graph is the running 7-day average to remove the impact of weekends.

IMPORTANT: All data is relative to January 13, 2020. This data is NOT Seasonally Adjusted. People walk and drive more when the weather is nice, so I'm just using the transit data.

According to the Apple data directions requests, public transit in the 7 day average for the US is at 117% of the January 2020 level. 
New York City is doing well by this metric, but subway usage in NYC is down sharply (next graph).

----- New York City Subway Usage -----
Here is some interesting data on New York subway usage (HT BR).

New York City Subway UsageThis graph is from Todd W Schneider. This is weekly data since 2015. 
Most weeks are between 30 and 35 million entries, and currently there are under 15 million subway turnstile entries per week, but mostly moving up recently.

This data is through Friday, October 15th.

Schneider has graphs for each borough, and links to all the data sources.

He notes: "Data updates weekly from the MTA’s public turnstile data, usually on Saturday mornings".

Sunday Night Futures

Weekend:
Schedule for Week of October 17, 2021

Will 4% Mortgage Rates "Halt the Housing Market"?

Monday:
• At 9:15 AM ET, The Fed will release Industrial Production and Capacity Utilization for September. The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 76.5%.

• At 10:00 AM, The October NAHB homebuilder survey. The consensus is for a reading of  76, unchanged from 76 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 and DOW futures are down slightly (fair value).

Oil prices were up over the last week with WTI futures at $83.05 per barrel and Brent at $85.31 per barrel. A year ago, WTI was at $41, and Brent was at $41 - so WTI oil prices are up more than double year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.31 per gallon. A year ago prices were at $2.14 per gallon, so gasoline prices are up $1.17 per gallon year-over-year.

Will 4% Mortgage Rates "Halt the Housing Market"? Some comments on an interview with Ivy Zelman

Today, in the Newsletter: Will 4% Mortgage Rates "Halt the Housing Market"?

Excerpt:
On Friday, Sara Eisen asked: “Do you think this hot housing market gets even hotter?”

And Zelman answered:

"No. I don’t. I think the housing market is already starting to show some moderation. And I think that it is going to become even more evident as rates are starting to back up. And the continued upward pressure on home prices which is not sustainable is really impacting affordability. We are starting to see incentives by builders creep back into the market. And we are seeing resistance by consumers that are really questioning whether or not, not only can they can afford it, and do they really want to buy at the top of the market."
See my comments on the interview, and Please subscribe!

Newsletter Articles this Week

At the Calculated Risk Newsletter this week:

House Prices to National Average Wage Index

3rd Look at Local Housing Markets in September Adding Albuquerque, Atlanta, Colorado, Georgia, Jacksonville, Minnesota, New Hampshire, Portland, and South Carolina

Will House Prices Increase "a further 16% by the end of 2022"? This note is based on a new Goldman Sachs Forecast

Mortgage Rates Highest in 6 Months Refinance Activity Will Slow

This will usually be published several times a week, and will provide more in-depth analysis of the housing market.
The blog will continue as always!

You can subscribe at https://calculatedrisk.substack.com/  Currently all content is available for free - and some will always be free - but please subscribe!.

Schedule for Week of October 17, 2021

The key economic reports this week are September Housing Starts and Existing Home sales.

For manufacturing, September Industrial Production, and the October Philly Fed survey will be released this week.

----- Monday, October 18th -----
Industrial Production9:15 AM: The Fed will release Industrial Production and Capacity Utilization for September.

This graph shows industrial production since 1967.

The consensus is for a 0.2% increase in Industrial Production, and for Capacity Utilization to increase to 76.5%.

10:00 AM: The October NAHB homebuilder survey. The consensus is for a reading of  76, unchanged from 76 in September. Any number above 50 indicates that more builders view sales conditions as good than poor.

----- Tuesday, October 19th -----
Total Housing Starts and Single Family Housing Starts8:30 AM: Housing Starts for September.

This graph shows single and multi-family housing starts since 1968.

The consensus is for 1.620 million SAAR, up from 1.615 million SAAR.

----- Wednesday, October 20th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA's Architecture Billings Index for September (a leading indicator for commercial real estate).

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

----- Thursday, October 21st -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 290 thousand initial claims, down from 293 thousand last week.

8:30 AM: the Philly Fed manufacturing survey for October. The consensus is for a reading of 24.5, down from 30.7.

Existing Home Sales10:00 AM: Existing Home Sales for September from the National Association of Realtors (NAR). The consensus is for 6.06 million SAAR, up from 5.88 million in August.

The graph shows existing home sales from 1994 through the report last month.

----- Friday, October 22nd -----
10:00 AM: State Employment and Unemployment (Monthly) for September 2021

Q3 GDP Forecasts: Around 2%

These are forecasts of the advance estimate of GDP to be released on Oct 28th.

Here is a table of some of the forecasts over the last 2+ months. The significant downgrades during the quarter were primarily due to analysts underestimating the impact of the recent COVID wave, and also the impact of supply chain disruptions.
 MerrillGoldmanGDPNow7/30/217.0%9.0%6.1%8/20/214.5%5.5%6.1%9/10/214.5%3.5%3.7%9/17/214.5%4.5%3.6% 9/24/214.5%4.5%3.7%10/1/214.1%4.25%2.3%10/8/212.0%3.25%1.3%10/15/212.0%3.25%1.2%
From BofA Merrill Lynch:
We continue to track 2% for 3Q GDP [Oct 15 estimate]
emphasis added
From Goldman Sachs:
We left our Q3 GDP tracking estimate unchanged after rounding at +3¼% (qoq ar). [Oct 15 estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2021 is 1.2 percent on October 15, down from 1.3 percent on October 8. [Oct 15 estimate]

Black Knight: "Significant" Decline in Number of Homeowners in COVID-19-Related Forbearance Plans

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of October 12th.

From Andy Walden at Black Knight: Another Week of Significant Forbearance Declines
As expected, we saw another significant drop in the number of active forbearances this week, as the first wave of final plan expirations continues.

According to our McDash Flash daily forbearance tracking dataset, active plans fell by another 10%, for an overall reduction of 143,000 since last Tuesday – on top of last week’s 177,000 (-11%) drop.

Once again, declines were seen across all investor classes, led by an 88,000 (-19%) plan drop among loans held in bank portfolios and private label securities. The number of homeowners in GSE and FHA/VA loans in forbearance saw matching 6% declines, for 22,000 and 33,000 reductions respectively.

As of October 12, 1.25 million mortgage holders remain in COVID-19 related forbearance plans, representing 2.4% of all active mortgages, including 1.3% of GSE, 4% of FHA/VA and 3% of portfolio held and privately securitized loans.

Black Knight ForbearanceClick on graph for larger image.

More than 450,000 homeowners have exited their forbearance plans over the past two weeks alone. With some 47,000 September month-end expirations still left to process and another 329K scheduled for review for extension or removal in October, the potential for further, substantial declines will continue into early November.
emphasis added

Retail Sales Increased 0.7% in September

On a monthly basis, retail sales were increased 0.7% from August to September (seasonally adjusted), and sales were up 13.9 percent from September 2020.

From the Census Bureau report:
Advance estimates of U.S. retail and food services sales for September 2021, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $625.4 billion, an increase of 0.7 percent from the previous month, and 13.9 percent above September 2020. ... The July 2021 to August 2021 percent change was revised from up 0.7 percent to up 0.9 percent.
emphasis added
Retail Sales Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline were up 0.6% in September.
The stimulus checks boosted retail sales significantly in March and April.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Year-over-year change in Retail Sales Retail and Food service sales, ex-gasoline, increased by 12.1% on a YoY basis.

Sales in September were above expectations, and sales in July and August were revised up.

Friday: Retail Sales, NY Fed Mfg

Friday:
• At 8:30 AM ET, Retail sales for September will be released.  The consensus is for a 0.2% decrease in retail sales.

• Also at 8:30 AM, The New York Fed Empire State manufacturing survey for October. The consensus is for a reading of 27.0, down from 34.3.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for October).

House Prices to National Average Wage Index

Today, in the Newsletter: House Prices to National Average Wage Index

Excerpt:
This graph shows the ratio of house price indexes divided by the National Average Wage Index (the Wage index for 2020 was released yesterday). This uses the annual average National Case-Shiller index since 1976 (and an estimate for 2021). ...

As of 2021, house prices were well above the median historical ratio - and not far below the bubble peak. 
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Hotels: Occupancy Rate Down 9.6% Compared to Same Week in 2019

Note: Since occupancy declined sharply at the onset of the pandemic, CoStar is comparing to 2019.

From CoStar: STR: Columbus Day Weekend Extends US Hotel Summer Performance
Lifted by the long Columbus Day weekend, U.S. hotel performance rose to a level similar to late summer, according to STR‘s latest data through October 9.

October 3-9, 2021 (percentage change from comparable week in 2019*):

Occupancy: 63.9% (-9.6%)
• Average daily rate (ADR): US$134.63 (+2.4%)
• Revenue per available room (RevPAR): US$86.02 (-7.4%)

*Due to the steep, pandemic-driven performance declines of 2020, STR is measuring recovery against comparable time periods from 2019.
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 2021, black is 2020, blue is the median, dashed purple is 2019, and dashed light blue is for 2009 (the worst year on record for hotels prior to 2020).
Note: Y-axis doesn't start at zero to better show the seasonal change.
The Summer months had decent occupancy with solid leisure travel, and occupancy was only off about 7% in July and August compared to 2019.
Usually weekly occupancy increases to around 70% in the weeks following Labor Day due to renewed business travel.   However, this year, so far, business travel has been lighter than leisure travel in 2021.

Weekly Initial Unemployment Claims Decrease to 293,000

The DOL reported:
In the week ending October 9, the advance figure for seasonally adjusted initial claims was 293,000, a decrease of 36,000 from the previous week's revised level. This is the lowest level for initial claims since March 14, 2020 when it was 256,000. The previous week's level was revised up by 3,000 from 326,000 to 329,000. The 4-week moving average was 334,250, a decrease of 10,500 from the previous week's revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week's average was revised up by 750 from 344,000 to 344,750.
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 decreased to 334,250.

The previous week was revised up.

Regular state continued claims decreased to 2,593,000 (SA) from 2,727,000 (SA) the previous week.

Weekly claims were lower than the consensus forecast.