Home Prices Continue to Decline in September

2022-11-29T11:16:59-06:00

Home prices declined for the third straight month in September as the housing market continues to cool. In September, all 20 metro areas experienced negative home price appreciation. The S&P CoreLogic Case-Shiller U.S. National Home Price Index, reported by S&P Dow Jones Indices, fell at a seasonally adjusted annual growth rate of 8.7% in September, following a 6.4% decline in July and a 10.4% decrease in August. After a decade of growth, home prices started to decline in July, driven by elevated interest rates and high construction costs. The July decline marked the first decline since February 2012, and the September decline marks the third consecutive monthly decline. Nonetheless, national home prices are now 62.4% higher than their last peak during the housing boom in March 2006. On a year-over-year basis, the S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index posted a 10.6% annual gain in September, after a 12.9% increase in August. Year-over-year home price appreciation slowed for the sixth consecutive month. Meanwhile, the Home Price Index, released by the Federal Housing Finance Agency (FHFA), increased at a seasonally adjusted annual rate of 0.9% in September, following the previous two months’ decreases. On a year-over-year basis, the FHFA Home Price NSA Index rose by 11.0% in September, following a 12.0% increase in August. The FHFA thus confirmed the slowdown in home price appreciation. In addition to tracking national home price changes, S&P CoreLogic reported home price indexes across 20 metro areas in September. All 20 metro areas reported negative home price appreciation. Their annual growth rates ranged from -23.2% to -3.7% in September. San Francisco, Las Vegas, and Phoenix experienced the most monthly declines in home prices. San Francisco declined 23.2%, while Las Vegas and Phoenix declined 22.7% and 22.3%, respectively. The scatter plot below lists the 20 major U.S. metropolitan areas’ annual growth rates in August and in September 2022. The X-axis presents the annual growth rates in August; the Y-axis presents the annual growth rates in September.  Compared to last month, home prices declined faster in September in the following 12 metro areas: Phoenix, Miami, Tampa, Atlanta, Chicago, Boston, Detroit, Charlotte, Las Vegas, New York, Cleveland, and Dallas. Related ‹ Declining Trend of Two-Story FoyerTags: FHFA Home Price Index, home prices, S&P CoreLogic Case-Shiller Home Price Index

Home Prices Continue to Decline in September2022-11-29T11:16:59-06:00

Employment Situation in October: State-Level Analysis

2022-11-22T08:16:53-06:00

Nonfarm payroll employment increased in 42 states in October compared to the previous month while eight states and the District of Columbia lost jobs. According to the Bureau of Labor Statistics, nationwide total nonfarm payroll employment increased by 261,000 in October, following a gain of 315,000 jobs in September. On a month-over-month basis, employment data was strong in California, which added 56,700 jobs, followed by Texas (+49,500), and Florida (+36,400). Eight states lost a total of 26,400 jobs.  In percentage terms, employment in Hawaii increased by 0.8% while Wyoming reported a 0.4% decline between September and October. Year-over-year ending in October, 5.3 million jobs have been recovered, marking a full recovery of the labor market from the COVID-19 pandemic induced recession. All the states and District of Columbia added jobs compared to a year ago. The range of job gains spanned 695,500 jobs in California to 100 jobs added in Mississippi. In percentage terms, Texas reported the highest increase by 5.4%, while Mississippi was essentially unchanged (0.0%) compared to a year ago. Across the 48 states which reported construction sector jobs data—which includes both residential as well as non-residential construction— 25 states reported an increase in October compared to September, while 19 lost construction sector jobs. Four states, Alaska, Minnesota, Montana, and Rhode Island reported no change. New York added 4,500 construction jobs while Pennsylvania lost 3,500 jobs. Overall, the construction industry added a net 1,000 jobs in October compared to the previous month. In percentage terms, North Dakota increased by 2.0% while Louisiana reported a decline of 2.7% between September and October. Year-over-year, construction sector jobs in the U.S. increased by 266,000, which is a 3.6% increase compared to the October 2021 level. Texas added 41,600 jobs, which was the largest gain of any state, while Louisiana lost 9,000 construction sector jobs. In percentage terms, North Dakota had the highest annual growth rate in the construction sector by 20.8%. Over this period, Louisiana reported a decline of 6.8%. Related ‹ Gain for Custom Home BuildingNew Single-Family Home Size Trending Lower ›Tags: construction labor, economics, state and local markets, state employment

Employment Situation in October: State-Level Analysis2022-11-22T08:16:53-06:00

Credit Conditions for Builders and Developers Continue to Worsen

2022-11-16T12:17:02-06:00

During the third quarter of 2022, credit continued to become less available and generally more costly on loans for Acquisition, Development & Construction (AD&C) according to NAHB’s Survey on AD&C Financing. To analyze credit availability, responses from the NAHB survey are used to construct a net easing index, similar to the net easing index based on the Federal Reserve’s survey of senior loan officers (SLOOS).  In the third quarter of 2022, both the NAHB and Fed indices were negative, indicating tightening credit conditions.  This was the third consecutive quarter during which indices from both surveys indicated tighter credit.  Moreover, both indices were more negative in the third quarter than they had been in the second, and far more negative than they had been in the first.  In the first quarter of the year, the NAHB net easing index stood at -2.3 before declining to -21.0 in the second quarter and  -36.0 in the third.  Similarly, the Fed net easing index was -4.7 in the first quarter of 2022, but subsequently fell to -48.4 in the second quarter and -57.6 in the third.  In short, the tightening of credit conditions for builders and developers is becoming more widespread. According to the NAHB survey, the most common ways in which lenders tightened in the third quarter were by increasing the interest rate on the loans (cited by 74 percent of the builders and developers who reported tighter credit conditions), reducing amount they are willing to lend (60 percent) and lowering the allowable Loan-to-Value or Loan-to-Cost ratio (46 percent). Meanwhile, the average effective rate (based on rate of return to the lender over the assumed life of the loan taking both the contract interest rate and initial fee into account) increased on three of the four categories of loans tracked in the AD&C Survey: from 9.55 to 9.67 percent on loans for land development, from 8.48 to 9.95 percent on loans for speculative single-family construction, and from 8.63 to 10.76 percent on loans for pre-sold single-family construction. These increases were due to increases in both the contract interest rate and the initial points charged on the loans.  The average contract rate increased from 6.27 to 6.42 percent on loans for land development, from 5.39 to 6.16 percent on loans for speculative single-family construction, and from 5.24 to 5.85 percent on loans for pre-sold single-family construction.  Similarly, average points increased from 0.90 to 0.93 percent on loans for land development, from 0.63 to 0.76 percent on loans speculative single-family construction, and from 0.59 to 0.89 percent on loans for pre-sold single-family construction. On the fourth category of loans in the AD&C survey (for pure land acquisition) the average effective rate declined slightly, from 8.19 percent to 7.97 percent.  Again, this was due to a combined effect of the contract rate and points on the loans moving in the same direction.  The average contract rate on land acquisition loans declined from 6.16 to 6.09 percent, while the average points declined from 0.86 to 0.79 percent. These generally worsening credit conditions are contributing to the weakness in builder confidence reported by NAHB earlier today.  Additional detail on current credit conditions for builders and developers is available on NAHB’s AD&C Financing Survey web page. Related ‹ Builder Confidence Declines for 11 Consecutive Months as Housing Weakness ContinuesTags: ad&c lending, ad&c loans, ADC, construciton loans, construction lending, credit conditions, economics, home building, housing, interest rates, lending

Credit Conditions for Builders and Developers Continue to Worsen2022-11-16T12:17:02-06:00

Inflation Shifts to Slowest Pace Since January

2022-11-10T11:17:45-06:00

Consumer prices in October saw the smallest year-over-year gain since January 2022, and while still elevated, inflation experienced the first month below an 8% annual growth rate since February 2022. However, the shelter index continued to rise at an accelerated pace and the energy index increased after declining for three straight months. As inflation appears to have peaked and has started to slow, this may ease some of pressure on the Fed to maintain its aggressive monetary policy. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in October on a seasonally adjusted basis, following the same increase in September. The price index for a broad set of energy sources rose by 1.8% in October as a decline in natural gas (-4.6%) partly offset an increase in electricity (+0.1%) and gasoline index (+4.0%). Excluding the volatile food and energy components, the “core” CPI increased by 0.3% in October, following an increase of 0.6% in September. Meanwhile, the food index increased by 0.6% in October with the food at home index rising 0.4%. Most component indexes continued to increase in October. The indexes for shelter (+0.8%), motor vehicle insurance (+1.7%), recreation (+0.7%), new vehicles (+0.4%) as well as personal care (+0.5%) showed sizeable monthly increases in October. Meanwhile, the indexes for used cars and trucks (-2.4%), apparel (-0.7%), medical care (-0.5%) and airline fares (-1.1%) declined in October. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.8% in October, following an increase of 0.7% in September. This is the largest monthly increase since August 1990. The indexes for owners’ equivalent rent (OER) increased by 0.6% and rent of primary residence (RPR) increased by 0.7% over the month. Monthly increases in OER have averaged 0.7% over the last three months. More cost increases are coming from this category, which will maintain pressure on inflationary forces in the months ahead. These higher costs are driven by lack of supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 7.7% in October, following an 8.2% increase in September. The “core” CPI increased by 6.3% over the past twelve months, following a 6.6% increase in September. The food index rose by 10.9% and the energy index climbed by 17.6% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.4% in October. Over the first ten months of 2022, the monthly change of the Real Rent Index increased by 0.1%, on average. Related ‹ Unsurprisingly, Housing Affordability Continues to FallTags: cpi, inflation, monetary policy

Inflation Shifts to Slowest Pace Since January2022-11-10T11:17:45-06:00

Labor Market Softens in October

2022-11-04T11:18:49-05:00

Job growth slowed in October as the Fed continues its tightening of financial conditions to fight inflation, but the overall labor market remains tight. The unemployment rate increased by 0.2 percentage points to 3.7% in October as the number of persons in the labor force decreased for the second straight month. Total nonfarm payroll employment increased by 261,000 in October, following a gain of 315,000 in September, as reported in the Employment Situation Summary. It marks the smallest monthly job gain in nearly two years. The estimate for August was revised down by 23,000, from +315,000 to +292,000, while the September increase was revised up by 52,000, from +263,000 to +315,000. In the first ten months of 2022, nearly 4.1 million jobs were created, and monthly employment growth averaged 407,000 per month. The unemployment rate ticked up by 0.2 percentage points to 3.7% in October. The number of unemployed persons increased by 306,000 to 6.1 million, while the number of employed persons decreased by 328,000. Meanwhile, the labor force participation rate, the proportion of the population either looking for a job or already with a job, edged down 0.1 percentage point to 62.2% in October, reflecting the increase in the number of persons not in the labor force and the decrease in the number of persons in the labor force. Moreover, the labor force participation rate for people aged between 25 and 54 decreased to 82.5%. Both of these two rates are still below their pre-pandemic levels in the beginning of 2020, and are not fully recovered from the COVID-19 pandemic. For industry sectors, health care (+53,000), professional and technical services (+43,000), and manufacturing (+32,000) led job gains in October. Employment in the overall construction sector was little changed (+1,000) in October, following a 22,000 gain in September. Residential construction gained 900 jobs, while non-residential construction employment gained 300 jobs in October. Residential construction employment currently exceeds its level in February 2020, while 83% of non-residential construction jobs lost in March and April have now been recovered. Residential construction employment now stands at 3.2 million in October, broken down as 904,000 builders and 2.3 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 6,217 a month. Over the last 12 months, home builders and remodelers added 105,300 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,195,000 positions. In October, the unemployment rate for construction workers rose by 1.0 percentage points to 5.5% on a seasonally adjusted basis. The unemployment rate for construction workers has been trending lower, after reaching 14.2% in April 2020, due to the housing demand impact of the COVID-19 pandemic. Related ‹ Share of Young Adults Living with Parents Declined in 2021Tags: employment, labor force, labor force participation rate, residential construction employment

Labor Market Softens in October2022-11-04T11:18:49-05:00

Economic Growth and Signs of Cooling Inflation in Third Quarter

2022-10-27T12:17:44-05:00

Real GDP grew in the third quarter, after shrinking for the first two straight quarters of 2022. This quarter’s growth was mostly fueled by a decline in the trade deficit. More important, the data from the GDP report suggests that inflation is cooling. The GDP price index, rose 4.1% for the third quarter, down from a 9.0% increase in the second quarter. Also, the Personal Consumption Expenditures (PCE) price Index, capturing inflation (or deflation) across a wide range of consumer expenses and reflecting changes in consumer behavior, rose 4.2% in the third quarter, down sharply from 7.3%. Looking forward, a mild recession is expected in the coming year as the Federal Reserve continues to tighten financial conditions. According to the “advance” estimate released by the Bureau of Economic Analysis (BEA), real gross domestic product (GDP) increased at an annual rate of 2.6% in the third quarter, following a 0.6% decrease in the second quarter and a decline of 1.6% in the first quarter. This quarter’s increase reflected increases in exports, consumer spending, nonresidential fixed investment, federal government spending, and state and local government spending, partially offset by decreases in residential fixed investment and private inventory investment. In the third quarter, exports increased 14.4%, while imports, which are a subtraction in the calculation of GDP, decreased 6.9%. Net exports rose by $156.6 billion in the third quarter, contributing 2.77 percentage points to GDP growth. Meanwhile, federal government spending increased 3.7% in the third quarter, reflecting increases in both national defense and nondefense spending, while state and local government spending rose 1.7%, led by an increase in compensation of state and local government employees. Consumer spending rose at an annual rate of 1.4% in the third quarter, down from a 2.0% increase in the second quarter. An increase in services was partly offset by a decrease in goods services. While expenditures on services increased 2.8% at an annual rate, goods spending decreased 1.2% at an annual rate, led by motor vehicles and parts (-11.7%) as well as food and beverages (-3.8%). Nonresidential fixed investment increased 3.7% in the third quarter. Increases in equipment and intellectual property products were partly offset by a decrease in structures. Within residential fixed investment, single-family structures declined 36.3% at an annual rate, multifamily structures declined 5.5% and other structures (specifically brokers’ commissions) decreased 21.5%. Related ‹ Housing Share of GDP Continues to DecreaseTags: economics, gdp, inflation, macroeconomics, macroeconomy, PCE, residential fixed investment, the GDP price index

Economic Growth and Signs of Cooling Inflation in Third Quarter2022-10-27T12:17:44-05:00

Employment Situation in September: State-Level Analysis

2022-10-24T09:18:02-05:00

Nonfarm payroll employment increased in 44 states and the District of Columbia in September compared to the previous month while six states lost jobs. According to the Bureau of Labor Statistics, nationwide total nonfarm payroll employment increased by 263,000 in September, following a gain of 315,000 jobs in August. On a month-over-month basis, employment data was strong in Florida, which added 48,800 jobs, followed by Texas (+40,000), and North Carolina (+17,400). Six states lost a total of 18,300 jobs.  In percentage terms, employment in New Hampshire and Kentucky each increased by 0.8% while Delaware reported a 0.6% decline between August and September. Year-over-year ending in September, 5.7 million jobs have been recovered, marking a full recovery of the labor market from the COVID-19 pandemic induced recession. All the states and District of Columbia added jobs compared to a year ago. The range of job gains spanned 721,800 jobs in Texas to 6,600 jobs added in Alaska. In percentage terms, Texas reported the highest increase by 5.6%, while Mississippi increased by 1.2% compared to a year ago. Across the 48 states which reported construction sector jobs data—which includes both residential as well as non-residential construction— 30 states reported an increase in September compared to August, while 15 lost construction sector jobs. New Hampshire, Oregon, and Rhode Island reported no change. Florida added 6,900 construction jobs while New Jersey lost 2,700 jobs. Overall, the construction industry added a net 19,000 jobs in September compared to the previous month. In percentage terms, North Dakota increased by 4.6% while Alabama reported a decline of 2.4% between August and September. Year-over-year, construction sector jobs in the U.S. increased by 292,000, which is a 3.9% increase compared to the September 2021 level. California added 44,500 jobs, which was the largest gain of any state, while New Jersey lost 3,800 construction sector jobs. In percentage terms, North Dakota had the highest annual growth rate in the construction sector by 19.2%. Over this period, South Carolina reported a decline of 2.8%. Related ‹ Spec Square Foot Prices Skyrocket in 2021Prospect of Higher Rates Leads Some to Consider Buying a Home ›Tags: construction labor, economics, state and local markets, state employment

Employment Situation in September: State-Level Analysis2022-10-24T09:18:02-05:00

Inflation Remains Stubbornly High Despite Fed Rate Hikes

2022-10-13T12:20:18-05:00

Consumer prices eased in September for the third-straight month as declines in energy prices partly offset increases in food and shelter indexes. Despite this slight improvement, inflation remains above an 8% year-over-year rate for the seven straight month. The food and shelter indexes continued to rise at an accelerated pace, with the owners’ equivalent rent index seeing the largest monthly increase since June 1990. Though it is likely that both core PCE and CPI measures of inflation have peaked, the Fed is expected to remain aggressive with respect to tightening monetary policy. It is also worth noting that higher interest rates will have limited effects on rising rent (a function of a lack of attainable housing) or the ongoing labor shortage. The Bureau of Labor Statistics (BLS) reported that the Consumer Price Index (CPI) rose by 0.4% in September on a seasonally adjusted basis, following an increase of 0.1% in August. The price index for a broad set of energy sources fell by 2.1% in September as a decline in gasoline (-4.9%) partly offset an increase in electricity (+0.4%) and natural gas index (+2.9%). Excluding the volatile food and energy components, the “core” CPI increased by 0.6% in September, as it did in August. Meanwhile, the food index increased by 0.8% in September, the same increase as August. Most component indexes continued to increase in September. The indexes for shelter (+0.7%), medical care (+0.8%), motor vehicle insurance (+1.6%), household furnishings and operations (+0.5%) as well as education (+0.4%) showed sizeable monthly increases in September. Meanwhile, the indexes for used cars and trucks (-1.1%), apparel (-0.3%) and communication (-0.1%) declined in September. The index for shelter, which makes up more than 40% of the “core” CPI, rose by 0.6% in September, following an identical increase in August. The indexes for owners’ equivalent rent (OER) and rent of primary residence (RPR) both increased by 0.8% over the month. Monthly increases in OER have averaged 0.7% over the last three months. More cost increases are coming from this category, which will add to inflationary forces in the months ahead. These higher costs are driven by lack of supply and higher development costs. Higher interest rates will not slow these costs, which means the Fed’s tools are limited in addressing shelter inflation. During the past twelve months, on a not seasonally adjusted basis, the CPI rose by 8.2% in September, following an 8.3% increase in August. The “core” CPI increased by 6.6% over the past twelve months, following an 6.3% increase in August. The food index rose by 11.2% and the energy index climbed by 19.8% over the past twelve months. NAHB constructs a “real” rent index to indicate whether inflation in rents is faster or slower than overall inflation. It provides insight into the supply and demand conditions for rental housing. When inflation in rents is rising faster (slower) than overall inflation, the real rent index rises (declines). The real rent index is calculated by dividing the price index for rent by the core CPI (to exclude the volatile food and energy components). The Real Rent Index rose by 0.3% in September. Over the first nine months of 2022, the monthly change of the Real Rent Index increased by 0.1%, on average. Related ‹ Remodeling Market Sentiment Softened in Third Quarter, But Remains PositiveTags: cpi, inflation, monetary policy, owners’ equivalent rent

Inflation Remains Stubbornly High Despite Fed Rate Hikes2022-10-13T12:20:18-05:00

Residential Building Wage Growth Slowing

2022-10-11T10:20:39-05:00

By Jing Fu on October 11, 2022 • Average hourly earnings for residential building workers* continue to rise in August but at a slower pace. Wage growth has retreated from the highest rate of 2021. The recent housing slowdown indicates that, while labor demand is still high, employers are cautious about hiring amid a slowing economy and rising interest rates. According to the Bureau of Labor Statistics (BLS) report, average hourly earnings (AHE) for residential building workers were $29.32 in August 2022, increasing 3% from $28.45 a year ago. This was 16.8% higher than the manufacturing’s average hourly earnings of $25.11, 10.8% higher than transportation and warehousing’s, and 11.5% lower than mining and logging’s. Average hourly earnings for residential building workers have increased significantly since the COVID-19 pandemic recession. The year-over-year growth rate reached to 8% in October 2021, the highest rate since February 2019, but this rate is now decelerating. Indeed, the construction labor market is generally cooling off as economic activity slows due to tighter monetary policy. Note: * Data used in this blog relate to production and nonsupervisory workers in the residential building industry. This group accounts for approximately two-third of the total employment on residential building industry. Related ‹ Job Growth Slows in SeptemberTags: average hourly earnings, labor market, residential building, wages

Residential Building Wage Growth Slowing2022-10-11T10:20:39-05:00

Job Growth Slows in September

2022-10-07T10:17:30-05:00

Job growth slowed in September as the Fed raises interest rates aggressively to fight inflation, but the overall labor market remains tight. The unemployment rate edged down to 3.5% as the number of persons in the labor force decreased by 57,000 in September. Total nonfarm payroll employment increased by 263,000 in September, following a gain of 315,000 in August, as reported in the Employment Situation Summary. It marks the lowest monthly job gain in the past 17 months. The estimate for August remained unchanged, while the July increase was revised up by 11,000, from +526,000 to +537,000. In the first nine months of 2022, nearly 3.8 million jobs were created, and monthly employment growth averaged 420,000 per month. In September, the unemployment rate decreased by 0.2 percentage points to 3.5%, returning to its February 2020 level. The number of unemployed persons declined by 261,000 to 5.8 million, while the number of employed persons increased by 204,000. Meanwhile, the labor force participation rate, the proportion of the population either looking for a job or already with a job, edged down 0.1 percentage point to 62.3% in September. Moreover, the labor force participation rate for people who aged between 25 and 54 decreased to 82.7%. Both of these two rates are still below their pre-pandemic levels in the beginning of 2020, and are not fully recovered from the COVID-19 pandemic. For industry sectors, leisure and hospitality (+83,000), and health care (+60,000) led job gains in September, while employment in financial activities, transportation and warehousing, retail trade, and government declined over the month. Employment in the overall construction sector increased by 19,000 to 7.7 million in September, following a 11,000 gain in August. Residential construction gained 6,400 jobs, while non-residential construction employment gained 13,100 jobs in September. Residential construction employment currently exceeds its level in February 2020, while 84% of non-residential construction jobs lost in March and April have now been recovered. Residential construction employment now stands at 3.2 million in September, broken down as 901,000 builders and 2.3 million residential specialty trade contractors. The 6-month moving average of job gains for residential construction was 6,517 a month. Over the last 12 months, home builders and remodelers added 110,500 jobs on a net basis. Since the low point following the Great Recession, residential construction has gained 1,192,800 positions. In September, the unemployment rate for construction workers declined by 0.5 percentage points to 4.5% on a seasonally adjusted basis. The unemployment rate for construction workers has been trending lower, after reaching 14.2% in April 2020, due to the housing demand impact of the COVID-19 pandemic. Related ‹ State-Level GDP in the Second Quarter of 2022Tags: employment, labor force, labor force participation rate, residential construction employment

Job Growth Slows in September2022-10-07T10:17:30-05:00

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