Individual Economists

Single Family Starts Up 35% Year-over-year in February; Multi-Family Starts Down Sharply

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Today, in the Calculated Risk Real Estate Newsletter: Single Family Starts Up 35% Year-over-year in February; Multi-Family Starts Down Sharply

A brief excerpt:
Total housing starts in February were above expectations and starts in December and January were revised up.

Last month, I noted that permits held up better than starts in January, and that housing starts were impacted by the severe weather in January. For February, permits and starts were at about the same level.

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

Starts 2022 vs 2023Total starts were up 5.9% in February compared to February 2023.

Starts were up year-over-year for the third consecutive month, after being down year-over-year for 16 of the previous 18 months.

Housing Starts Increased to 1.521 million Annual Rate in February

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From the Census Bureau: Permits, Starts and Completions
Housing Starts:
Privately‐owned housing starts in February were at a seasonally adjusted annual rate of 1,521,000. This is 10.7 percent above the revised January estimate of 1,374,000 and is 5.9 percent above the February 2023 rate of 1,436,000. Single‐family housing starts in February were at a rate of 1,129,000; this is 11.6 percent above the revised January figure of 1,012,000. The February rate for units in buildings with five units or more was 377,000.

Building Permits:
Privately‐owned housing units authorized by building permits in February were at a seasonally adjusted annual rate of 1,518,000. This is 1.9 percent above the revised January rate of 1,489,000 and is 2.4 percent above the February 2023 rate of 1,482,000. Single‐family authorizations in February were at a rate of 1,031,000; this is 1.0 percent above the revised January figure of 1,021,000. Authorizations of units in buildings with five units or more were at a rate of 429,000 in February.
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 February compared to January.   Multi-family starts were down 34.8% year-over-year in February.

Single-family starts (red) increased in February and were up 35.2% 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 February were above expectations and starts in December and January were revised up.

I'll have more later …

"The Lock-In Effect of Rising Mortgage Rates"

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Today, in the Calculated Risk Real Estate Newsletter: "The Lock-In Effect of Rising Mortgage Rates"

A brief excerpt:
Here is new working paper from Federal Housing Finance Agency (FHFA) staff Ross M. Batzer Jonah R. Coste William M. Doerner Michael J. Seiler quantifying the impact of the “lock-in effect”: The Lock-In Effect of Rising Mortgage Rates

And here is their conclusion:
This paper finds that for every percentage point that market mortgage rates exceed the origination interest rate, the probability of sale is decreased by 18.1%. This mortgage rate lock-in led to a 57% reduction in home sales with fixed-rate mortgages in 2023Q4 and prevented 1.33 million sales between 2022Q2 and 2023Q4. The supply reduction increased home prices by 5.7%, outweighing the direct impact of elevated rates, which decreased prices by 3.3%. These findings underscore how mortgage rate lock-in restricts mobility, results in people not living in homes they would prefer, inflates prices, and worsens affordability.
emphasis added
There is much more in the article.

Tuesday: Housing Starts

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Mortgage Rates From Matthew Graham at Mortgage News Daily: Mortgage Rates Inch to March Highs
Rates marched higher to the highest levels in March today, but most lenders are only microscopically worse off than Friday afternoon. In the slightly bigger picture rates have moved up roughly a quarter of a percent in just over a week and that's a relatively quick move.
...
We already know the Fed will not be cutting rates. We don't know how they'll adjust their rate outlook for the rest of the year. [30 year fixed 7.11%]
emphasis added
Tuesday:
• At 8:30 AM ET, Housing Starts for February. The consensus is for 1.435 million SAAR, up from 1.331 million SAAR.

MBA Survey: Share of Mortgage Loans in Forbearance Holds Steady at 0.22% in February

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From the MBA: Share of Mortgage Loans in Forbearance Holds Steady at 0.22% in February
The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance remained unchanged at 0.22% as of February 29, 2024. According to MBA’s estimate, 110,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 8.1 million borrowers since March 2020.

In February 2024, the share of Fannie Mae and Freddie Mac loans in forbearance declined 1 basis point to 0.12%. Ginnie Mae loans in forbearance increased by 1 basis point to 0.40%, and the forbearance share for portfolio loans and private-label securities (PLS) increased 1 basis point to 0.29%.

“The performance of servicing portfolios and loan workouts improved in February, as borrowers benefitted from tax refunds, the extra day in the month to submit their payments, and continued resilience in the job market,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Only around 110,000 loans nationwide remain in a forbearance plan, with little movement this month. The pandemic’s impact has waned, with only 16 percent of borrowers in forbearance because of COVID-19, compared to 72 percent for temporary personal hardships and 12 percent for natural disasters.”
emphasis added
At the end of February, there were about 110,000 homeowners in forbearance plans.

LA Port Traffic Increased Sharply Year-over-year in February

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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 2.8% in February compared to the rolling 12 months ending in January.   Outbound traffic increased 1.0% 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 46% YoY in February, and exports were up 14% YoY.    There is usually a dip in the new year depending on the timing of the Chinese New Year, but that didn't happen this year.
In general, it appears port traffic is returning to the pre-pandemic patterns.

NAHB: Builder Confidence Increased in March

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The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 51, up from 48 last month. Any number above 50 indicates that more builders view sales conditions as good than poor.

From the NAHB: Builder Sentiment Rises Above Breakeven Point
A lack of existing inventory that continues to drive buyers to new home construction, coupled with strong demand and mortgage rates below last fall’s cycle peak helped push builder sentiment above a key marker in March.

Builder confidence in the market for newly built single-family homes climbed three points to 51 in March, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. This is the highest level since July 2023 and marks the fourth consecutive monthly gain for the index. It is also the first time that the sentiment level has surpassed the breakeven point of 50 since last July.

“Buyer demand remains brisk and we expect more consumers to jump off the sidelines and into the marketplace if mortgage rates continue to fall later this year,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “But even though there is strong pent-up demand, builders continue to face several supply-side challenges, including a scarcity of buildable lots and skilled labor, and new restrictive codes that continue to increase the cost of building homes.”

“With the Federal Reserve expected to announce future rate cuts in the second half of 2024, lower financing costs will draw many prospective buyers into the market,” said NAHB Chief Economist Robert Dietz. “However, as home building activity picks up, builders will likely grapple with rising material prices, particularly for lumber.”

With mortgage rates below 7% since mid-December per Freddie Mac, more builders are cutting back on reducing home prices to boost sales. In March, 24% of builders reported cutting home prices, down from 36% in December 2023 and the lowest share since July 2023. However, the average price reduction in March held steady at 6% for the ninth straight month. Meanwhile, the use of sales incentives is holding firm. The share of builders offering some form of incentive in March was 60%, and this has remained between 58% and 62% since last September.
...
All three of the major HMI indices posted gains in March. The HMI index charting current sales conditions increased four points to 56, the component measuring sales expectations in the next six months rose two points to 62 and the component gauging traffic of prospective buyers increased two points to 34.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 59, the Midwest gained five points to 41, the South rose four points to 50 and the West registered a five-point gain to 43.
emphasis added
NAHB HMI Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was above the consensus forecast.

Housing March 18th Weekly Update: Inventory Up 1.3% Week-over-week, Up 22.2% Year-over-year

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Altos reports that active single-family inventory was up 1.3% week-over-week. Inventory bottomed in mid-February, as opposed to mid-April in 2023, and inventory is now up 2.7% from the 2024 February bottom.
Altos Home Inventory Click on graph for larger image.

This inventory graph is courtesy of Altos Research.
As of March 15th, inventory was at 507 thousand (7-day average), compared to 501 thousand the prior week.   
Inventory is still far below pre-pandemic levels.  However, inventory is up 106% from the low for the same in 2022.
The second graph shows the seasonal pattern for active single-family inventory since 2015.
Altos Year-over-year Home Inventory
The red line is for 2024.  The black line is for 2019.  Note that inventory is up more than double from the record low for the same week in 2022, but still well below normal levels.
Inventory was up 22.2% compared to the same week in 2023 (last week it was up 21.1%), and down 38.5% compared to the same week in 2019 (last week it was down 38.7%). 
Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed a little.
Mike Simonsen discusses this data regularly on Youtube.

Sunday Night Futures

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Weekend:
Schedule for Week of March 17, 2024

Monday:
• At 10:00 AM ET, The March NAHB homebuilder survey. The consensus is for a reading of 48, unchanged from 48.  Any number below 50 indicates that more builders view sales conditions as poor than good.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 5 and DOW futures are down 27 (fair value).

Oil prices were up over the last week with WTI futures at $81.14 per barrel and Brent at $85.40 per barrel. A year ago, WTI was at $67, and Brent was at $71 - so WTI oil prices are up 20% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.44 per gallon. A year ago, prices were at $3.40 per gallon, so gasoline prices are up $0.04 year-over-year.

Lawler: Early Read on Existing Home Sales in February

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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 4.40 million in February, up 10% from January’s preliminary pace but down 2.9% from last February’s seasonally adjusted pace. Unadjusted sales should show a small YOY gain, with the SA/NSA difference reflecting the higher business day count this February compared with last February.

Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 6.5% from last February.

CR Note: The National Association of Realtors (NAR) is scheduled to release February existing home sales on Thursday, March 21st, at 10:00 AM ET. The consensus is for 3.94 million SAAR.

3rd Look at Local Housing Markets in February

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

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

This is the third look at several local markets in February. I’m tracking about 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 February were mostly for contracts signed in December and January when 30-year mortgage rates averaged 6.82% and 6.64%, respectively. This is down from the 7%+ mortgage rates in the August through November period.
...
Closed Existing Home SalesIn February, sales in these markets were up 1.4% YoY. In January, these same markets were up 2.4% year-over-year Not Seasonally Adjusted (NSA).

Sales in most of these markets are down compared to January 2019.
...
More local markets to come!
There is much more in the article.

GDP Tracking: Around 2%

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From BofA:
Since our update last week, 1Q GDP tracking is up one-tenth to 2.4% q/q saar; 4Q tracking is up three-tenths to 3.6% q/q saar. [Mar 15th estimate]
emphasis added
From Goldman:
We lowered our Q1 GDP tracking estimate by 0.1pp to +1.6% (qoq ar) and our Q1 domestic final sales forecast by 0.2pp to +2.0% (qoq ar), mainly reflecting the normalization of utilities output in February. [Mar 15th estimate]
And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2024 is 2.3 percent on March 14, down from 2.5 percent from March 7. After recent releases from the US Department of the Treasury's Bureau of the Fiscal Service, the US Bureau of Labor Statistics, and the US Census Bureau, a decrease in the nowcast of first-quarter real personal consumption expenditures growth from 2.9 percent to 2.2 percent was slightly offset by increases in the nowcasts of first-quarter real gross private domestic investment growth and first-quarter real government spending growth from 1.7 and 2.4 percent, respectively, to 3.0 and 2.7 percent. [March 14th estimate]

Industrial Production Increased 0.1% in February

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From the Fed: Industrial Production and Capacity Utilization
Industrial production edged up 0.1 percent in February after declining 0.5 percent in January. In February, the output of manufacturing rose 0.8 percent and the index for mining climbed 2.2 percent. Both gains partly reflected recoveries from weather-related declines in January. The index for utilities fell 7.5 percent in February because of warmer-than-typical temperatures. At 102.3 percent of its 2017 average, total industrial production in February was 0.2 percent below its year-earlier level. Capacity utilization for the industrial sector remained at 78.3 percent in February, a rate that is 1.3 percentage points 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 78.3% is 1.3% below the average from 1972 to 2022.  This was below 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 102.3. This is above the pre-pandemic level.

Industrial production was above consensus expectations.

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