economics

economics

Current State of the Housing Market; Overview for mid-September

Post By: September 14, 2023 0 Comment(s) , , , , , , , , , , , , , ,

by Calculated Risk on 9/14/2023 12:00:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-September

A brief excerpt:

Yesterday, in Part 1: Current State of the Housing Market; Overview for mid-September I reviewed home inventory and sales.
…
Most measures of house prices have shown an increase in prices over the last several months, and a key question I discussed in July is Will house prices decline further later this year? I will revisit this question soon.

Other measures of house prices suggest prices will be up YoY over the next few months in the Case-Shiller index. The NAR reported median prices were up 1.9% YoY in July, up from a 0.9% YoY decline in June. Black Knight reported prices were up 2.3% YoY in July to new all-time highs, and Freddie Mac reported house prices were up 2.9% YoY in July, up from 1.6% YoY in June – and also to new all-time highs.

Freddie Case-Shiller NAR House PricesHere is a comparison of year-over-year change in the FMHPI, median house prices from the NAR, and the Case-Shiller National index.

The FMHPI and the NAR median prices appear to be leading indicators for Case-Shiller. Based on recent monthly data, and the FMHPI, the YoY change in the Case-Shiller index will turn positive in the report for July.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

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Housing Shortages Turn Rental Apartments Into a Scarce Commodity Across Europe

Post By: September 4, 2023 0 Comment(s) , , , , , , , , , , , ,

In Zurich, apartment-hunters take wine and chocolates to viewings to help them stand out from the crowd. In Amsterdam, university students are spending months trying to secure accommodation before terms starts. In Dublin and Lisbon, young professionals are giving up and moving back in with their parents.

Across Europe’s biggest cities, renters are coming up against a severe supply shortage that’s pushing prices to record highs. Surging mortgage rates have forced people to give up on property purchases, just as inflation increases the cost of construction materials, hampering supply. Government policies and post-pandemic work trends have pushed skilled foreign workers who can often pay more than locals to Paris, Dublin, Berlin and Lisbon, while the return of students post-Covid has pushed up demand in places like London and Amsterdam.

The trend of rapidly rising rent since the pandemic isn’t unique to Europe, but it’s been exacerbated on the continent by the relatively small size of cities and the higher concentration of historic and low-rise buildings. If governments fail to take action, particularly around supply, they risk drastically increasing inequality as those who can’t afford to buy property fork out larger portions of their income on housing.

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Washington Street’s ‘Great West Side’ once bustling commercial strip

Post By: September 3, 2023 0 Comment(s) , , , , , , , , , , , , , , , , , , , , , , ,

Back when folks walked more and most everybody “shopped local,” Bloomington’s west side had several small commercial districts apart from the city’s downtown and its fancy department stores.

The largest of these comprised several blocks of West Chestnut Street and served the Chicago & Alton Railroad Shops to the immediate west.

Another working-class, west-side hub was the 1000 block of West Washington Street, with Morris Avenue to the east and Western Avenue and the Chicago & Alton Railroad (now Amtrak/Union Pacific) tracks to the west. Beginning in the late 19th century, this one-block stretch was home to candy, cigar and clothing stores, short-order diners, saloons, groceries, barbershops, modest apartments and some light industry.

Back a century ago the 1000 block of West Washington was a good place to do business. Next door were the McLean County Coal Co. mine, the Chicago & Alton (C&A) passenger station and the Paul F. Beich Co. candy factory, and thus the commercial block served neighborhood residents, the local workforce and railway travelers. In addition to the C&A, two more rail lines, at one time the Lake Erie and Western and the “Big Four,” passed right behind the south side of the block.

One imagines that the piercing whistles and hissing steam of locomotives provided a fitting soundtrack to those who lived and worked in the immediate neighborhood.

The block was long a mix of industrial and commercial enterprises. In 1889, Armour Packing Co. of Chicago erected a two-story wood frame structure on the north side of the block and just east of the C&A tracks. Armour used this building to store dressed beef shipped from Chicago, which in turn was sold wholesale to local butchers.

In July 1897 John Schloeffel erected a handsome two-story commercial building at the southwest corner of Morris and Washington to showcase his grocery and meat market.

A little bit later, African-American entrepreneur George Hoagland opened a cleaning supply factory on the block’s north side. Born in Kentucky to an enslaved mother, Hoagland and his wife Rosa settled in Normal in the late 1880s.

His factory employed African-American men and women involved in the manufacture of Hoagland’s brand name “Oil of Gladness” polish, good for hardwood floors, linoleum and the like.

Schloeffel’s sons, Arthur and Lester, kept the family grocery running for a time, though they ceded the corner (or west) half of their building to one-legged Paul Scholz, who operated a cigar and candy shop from that location into the 1920s.

Later that decade John Schloeffel opened a filling station at the northwest corner of Morris and Washington, opposite his commercial building and grocery. Today the filling station serves as home base for Circle City Cab Co.

In December 1930 brothers Lawrence, Maurice and Leo Irvin launched Evergreen Beverage Co., with the business eventually moving several doors down to 1005 W. Washington St. That building still stands though much of its façade is now obscured with corrugated metal.

“It was a hustling little area,” recalled Lawrence Irvin in 1980, thinking back to the old commercial block and Prohibition. “If it hadn’t been for the bootleggers, we wouldn’t have survived. We sold them soft drinks and they kept us in business.”

Evergreen later became Pepsi Cola Bottling Co. and relocated to Greenwood Avenue on the city’s south side.

From the late 1930s to the early 1950s Walt Bittner ran a confectionary in the corner half of the Schloeffel building. Bittner, who served as Bloomington mayor from 1969 to 1977, in his younger years took to calling the block the “Great West Side.”

Although a little worse for wear, the south side of 1000 block of West Washington Street was still a busy place in 1958. Starting from the Schloeffel building at the east end of the block and proceeding down the street, one could visit John and Gene’s Confectionary, Bee Hive Grocery, the Brokaw Hospital Service League Thrift Shop, Leonard H. Robinson’s barbershop, West Side Cleaners, New Deal Grocery, West Side Clothing and National Wine & Liquors. Today most of the buildings are gone.

By the mid-1970s the once-lively block was in visible decline as old neighborhood commercial districts (to say nothing of downtowns) across the nation were hollowed out by auto-centric suburban development epitomized by the sterile shopping mall. Along the block, vacant buildings were torn down and the empty lots given up to weeds and windblown trash. The wrecking ball met the lovely Schloeffel building in the early 1980s.

Even so, at least one business survived the decline to become a symbol of west side resilience, receiving the loyal support of countless folks from all over the Twin Cities — even the east side! West Side Clothing, dating back to 1914 and the partnership of George Teiber and Hungarian immigrant Steve Yeager, served successive generations seeking work clothes and no-nonsense attire. Clark and Mary Taminger became owners in 1980, and by defying the odds and west-side naysayers, Clark and his daughter Karen Bell kept the store open until 2012.

Illinois Secretary of State Alexi Giannoulias visited the McLean County Museum of History to explore its exhibits, library and archives


Clay Jackson



Pieces From Our Past is a weekly column by the McLean County Museum of History. Bill Kemp is the librarian at the museum.

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S&P CoreLogic Case-Shiller Index Is Coming. What to Expect on Home Prices.

Post By: August 28, 2023 0 Comment(s) , , , , , , , , , , , , ,

One closely watched measure of home prices likely fell short of its year-ago level in June. Other data show rising prices are likely around the corner.

The S&P CoreLogic Case-Shiller home-price indexes for June are expected on Tuesday at 9 a.m. Eastern. Economists expect the metric tracking prices in 20 of the U.S.’s biggest cities to be 1.3% lower than it was last June, according to FactSet consensus estimates.

The Case-Shiller indexes lag behind other measures of home prices, but are closely watched because of their methodology. The indexes are meant to track changes in the price of the same home over time, negating factors such as size or quality that might skew less comprehensive measures of median home-sale prices. They are also reported both as unadjusted and seasonally-adjusted data, allowing easier comparisons to the month prior. 

Home prices measured by the Case-Shiller 20-city index have been lower than year-ago levels since March, with May’s measure 1.7% below the same month in 2022. Annual declines in the national index, which measures home price changes more broadly, occurred starting in April, with shallower declines.

The drops below year-ago levels are more a reflection of home prices’ earlier run-up than an indication about the current market. House prices in the seasonally adjusted 20-city index peaked in June 2022 as historically low mortgage rates helped facilitate a homebuying frenzy. High demand for homes, which outstripped a low supply, helped send prices measured by the 20-city index up as much as 21% from a year earlier.

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Rising mortgage rates chilled the price gains. Both the national and 20-city indexes began to decline on a monthly basis in July 2022, a relative rarity in recent years for Case-Shiller’s seasonally-adjusted data. Prices slid for seven straight months before rising again in February. Gains have strengthened in the months that followed.

The month-over-month increases are expected to have continued in June, according to consensus estimates. Economists expect the report to show the seasonally-adjusted 20-city index increased 1% from May’s level—the same strong gain the index recorded the month prior. 

Prices have regained strength in recent months as homes for sale have remained limited, likely because higher mortgage rates have discouraged homeowners from moving, which would generally involve giving up a lower-cost loan for a more expensive one. In May, prices in seven of the 20 cities tracked by the Case-Shiller index hit new seasonally adjusted highs, data show. 

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A more recent, but less comprehensive, measure of home prices rose above year-ago levels in July for the first time since February. The National Association of Realtors said this month that the median home sold for $406,700 in July, roughly 2% above the same month one year prior. 

Of course, both the Case-Shiller and Realtors data cover a period before mortgage rates again rose above 7% in August, hitting the highest level in decades. That increase, combined with strong home prices, could put more of a strain on housing demand. 

What will happen to home prices has yet to be seen but the rise in mortgage rates represents a threat to their recent strength. “The last four months’ price gains could be truncated by increases in mortgage rates or by general economic weakness,” S&P Dow Jones Indices managing director Craig J. Lazzara said in a July statement coinciding with the release of the Case-Shiller data for May.

Write to Shaina Mishkin at shaina.mishkin@dowjones.com

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Schedule for Week of August 27, 2023

Post By: August 26, 2023 0 Comment(s) , , , , , , , , , , , , , ,

by Calculated Risk on 8/26/2023 08:11:00 AM

The key report this week is the August employment report on Friday.

Other key indicators include the second estimate of Q2 GDP, Personal Income and Outlays for July, the August ISM manufacturing index, August auto sales, and Case-Shiller house prices for June.


—– Monday, August 28th —–


10:30 AM: Dallas Fed Survey of Manufacturing Activity for August. This is the last of the regional Fed manufacturing surveys for August.

—– Tuesday, August 29th —–


Case-Shiller House Prices Indices9:00 AM: S&P/Case-Shiller House Price Index for June.

This graph shows the year-over-year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 1.1% year-over-year decrease in the Comp 20 index for June.

9:00 AM: FHFA House Price Index for June. This was originally a GSE only repeat sales, however there is also an expanded index.

Job Openings and Labor Turnover Survey10:00 AM Job Openings and Labor Turnover Survey for July from the BLS.

This graph shows job openings (yellow line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Jobs openings decreased in June to 9.58 million from 9.62 million in May.

The number of job openings (black) were down 13% year-over-year and Quits were down 9% year-over-year.


—– Wednesday, August 30th —–


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

8:15 AM: The ADP Employment Report for August. This report is for private payrolls only (no government).

8:30 AM: Gross Domestic Product, 2nd quarter 2022 (second estimate). The consensus is that real GDP increased 2.4% annualized in Q2, unchanged from the advance estimate of 2.4% in Q2.

10:00 AM: Pending Home Sales Index for July. The consensus is for a 0.8% decrease in the index.


—– Thursday, August 31st —–


8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 235 thousand initial claims, up from 230 thousand last week.

8:30 AM: Personal Income and Outlays, July 2023. The consensus is for a 0.3% increase in personal income, and for a 0.7% increase in personal spending. And for the Core PCE price index to increase 0.2%.  PCE prices are expected to be up 3.0% YoY, and core PCE prices up 4.1% YoY.

9:45 AM: Chicago Purchasing Managers Index for August.


—– Friday, September 1st —–


Employment per month8:30 AM: Employment Report for August.   The consensus is for 187,000 jobs added, and for the unemployment rate to be unchanged at 3.5%.

There were 187,000 jobs added in July, and the unemployment rate was at 3.5%.

This graph shows the jobs added per month since January 2021.

10:00 AM: ISM Manufacturing Index for August. The consensus is for the ISM to be at 46.6, up from 46.4 in July.

10:00 AM: Construction Spending for July. The consensus is for a 0.5% increase in construction spending.

Vehicle SalesAll Day: Light vehicle sales for August. The consensus is for light vehicle sales to be 15.4 million SAAR in August, down from 15.7 million in July (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the sales rate for last month.

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Park funding boosts home values

Post By: August 25, 2023 0 Comment(s) , , , ,

Newswise — Ohio residents who vote against tax renewals for parks and recreation spending could be costing themselves a significant amount of wealth in the form of their homes’ value, a University of Cincinnati economist found.

David Brasington, PhD, the James C. and Caroline Kautz Chair in Political Economy and professor of economics in UC’s Carl H. Lindner College of Business, studied the effect of cutting funding for the maintenance of local parks and recreational areas on housing values for a research article that was published in Journal of Regional Science.

Brasington found Ohio communities that vote to renew parks and recreation spending see 13% higher home values three years after the vote than similar communities that voted against the tax renewals. For the typical household, a vote against tax renewals saves $70 a year in taxes but costs $30,000 in house values.

“I was surprised by how strong the magnitude was,” Brasington said. “A 13% difference in house prices is really big. I was surprised a relatively small change in park funding could cause such a big change in house prices over time.”

In his research, Brasington focused on communities that according to data from the U.S. Census Bureau share similar demographic and economic characteristics. The only discernible difference was that some of them narrowly voted to renew tax levies while others narrowly voted against renewing their levies.

Using a housing data set, Brasington compared home values in the communities from 1991 through 2016.

While house prices didn’t reflect a change immediately, three years after the votes the communities that approved the park and recreation maintenance saw 13% higher house values compared to the communities that voted against their levies. In subsequent years, the gap continued to grow.

“I didn’t find any effects the first year after the vote or the second year after the vote, but they were noticeable three years later,” Brasington said. “The findings I have are consistent with the idea that right after you vote to cut parks and recreation taxes and funding, you don’t notice any effects on house prices, but as time goes on, maybe this decrease in maintenance funding starts to be noticeable and maybe it’s reflected in house prices.”

The data doesn’t mean that communities that vote against renewing tax levies see a 13% decrease in housing values or that communities that vote in favor of their levies see a 13% increase. Rather, an example could be one community seeing a 7% increase in housing values while another sees a 20% increase, Brasington said.

“When a local government offers services, they’re competing with other local governments for residents and businesses to build their tax base, so they want to offer good services that people care about,” he said.

The data shows parks are a service that people care about, Brasington said. It also shows that Ohio’s local parks might be underfunded.

“Parks and recreation spending seems worth it in Ohio,” he said. “There may be places where it isn’t, there may be places where it’s really, really worthwhile. But overall the parks and recreation spending is worth it in Ohio because the estimate is just an average across all the communities.”

Brasington’s findings on home prices aligns with his previous research on the value of local park funding. In a research article published in 2021, Brasington found communities that renewed tax funding for local parks had more residential development than those that cut park taxes and funding.

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UC economist finds link between park funding, home values

Post By: August 25, 2023 0 Comment(s) , , ,

While house prices didn’t reflect a change immediately, three years after the votes the communities that approved the park and recreation maintenance saw 13% higher house values compared to the communities that voted against their levies. In subsequent years, the gap continued to grow.

“I didn’t find any effects the first year after the vote or the second year after the vote, but they were noticeable three years later,” Brasington said. “The findings I have are consistent with the idea that right after you vote to cut parks and recreation taxes and funding, you don’t notice any effects on house prices, but as time goes on, maybe this decrease in maintenance funding starts to be noticeable and maybe it’s reflected in house prices.”

The data doesn’t mean that communities that vote against renewing tax levies see a 13% decrease in housing values or that communities that vote in favor of their levies see a 13% increase. Rather, an example could be one community seeing a 7% increase in housing values while another sees a 20% increase, Brasington said.

“When a local government offers services, they’re competing with other local governments for residents and businesses to build their tax base, so they want to offer good services that people care about,” he said.

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Same hospital, same insurer, but imaging prices twice as high for commercial vs. Medicare Advantage plans

Post By: August 23, 2023 0 Comment(s) , ,

For the study, researchers utilized 2022 hospital price transparency information, compiled by data firm Turquoise Health. They extracted negotiated commercial and MA prices from general acute care hospitals for 70 shoppable services and five ED visit codes. Meiselbach et al. included 46 services in the final sample, for which hospital disclosure rates were above 50%, and excluded the state of Maryland, where the state sets hospital prices paid by plans.

The final sample spanned 118 total insurers and 2,434 total hospitals. Across all service categories, median commercial prices were between 1.8 and 2.7 times more expensive than Medicare Advantage. When stated in dollar terms, the largest gap was within surgery and medicine (with a median of $1,702 for commercial plans vs. $925 in MA), followed by imaging ($490 vs. $191), lab tests ($32 vs. $12), and ED visits ($519 vs. $262). Regression-adjusted analysis revealed that commercial prices were between $660 and $707 more expensive than Medicare Advantage (or 2.1 to 2.2 times).

Meanwhile, commercial and MA prices were exactly the same 3.7%-6.6% of the time, including about 5.3% for imaging. Commercial pricing was more than five times higher than MA between 6.5%-27.2% of the time, including 23.1% in imaging. All major health insurers had median price ratios above 2 for most or all services categories, except for Centene, the authors noted. Kaiser Permanente, in particular, had the highest median ratios, including 3.7 for imaging.

“Future research should investigate the relative contributions of these various factors in affecting the price gap between commercial and MA prices,” the authors remarked. “Because insurers respond to differing incentives by negotiating substantially different prices across markets, policy and practice efforts that alter incentives for insurers may have the potential to lower commercial pricing.”

Read more at the link below.

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Current State of the Housing Market; Overview for mid-August

Post By: August 14, 2023 0 Comment(s) , , , , , , , , , , , , , ,

by Calculated Risk on 8/14/2023 03:52:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-August

A brief excerpt:

On Friday, in Part 1: Current State of the Housing Market; Overview for mid-August I reviewed home inventory and sales.
…
Most measures of house prices have shown an increase in prices over the last several months, and a key question is Will house prices decline further later this year?

Other measures of house prices suggest prices will be up YoY soon in the Case-Shiller index. The NAR reported median prices were down 0.9% YoY in June, smaller than the 3.0% YoY decline in May. Black Knight reported prices were up 0.8% YoY in June to new all-time highs, and Freddie Mac reported house prices were up 1.7% YoY in June, up from 0.8% in May.

Freddie Case-Shiller NAR House PricesHere is a comparison of year-over-year change in the FMHPI, median house prices from the NAR, and the Case-Shiller National index.

The FMHPI and the NAR median prices appear to be leading indicators for Case-Shiller. Based on recent monthly data, and the FMHPI, it seems likely the YoY change in the Case-Shiller index will turn positive this summer.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

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Leading Index for Commercial Real Estate Decreased in July

Post By: August 8, 2023 0 Comment(s) , , , , , , , , , , , , , ,

by Calculated Risk on 8/08/2023 02:42:00 PM

From Dodge Data Analytics: Dodge Momentum Index Recedes 1% in July

The Dodge Momentum Index (DMI), issued by Dodge Construction Network, declined 0.9% in July to 193.4 (2000=100) from the revised June reading of 195.1. Over the month, the commercial component of the DMI remained relatively flat, ticking down 0.2%, while the institutional component fell 1.9%.

“While both segments of the Index fell this month, underlying project data points to divergent trends in the nonresidential sector,” said Sarah Martin, associate director of forecasting for Dodge Construction Network. “In comparison to January 2023, commercial planning activity is down 10% through July, while institutional planning is up 16%. Distinctly large institutional projects entering planning in May temporarily inflated month-to-month trends, but activity has since ticked down. As we progress through the remainder of 2023, weaker commercial activity, resulting from tighter lending standards and higher interest rates, will counter sturdier institutional activity, bolstered by public funding and less sensitivity to interest rates.”

All commercial sectors pulled back, or remained flat, over the month of July. Hotel planning saw the largest month-over-month decay, marking four months of consecutive decline in the sector. July also saw a deceleration in the number of education and healthcare projects entering planning — the two largest institutional segments.
…
The DMI is a monthly measure of the initial report for nonresidential building projects in planning, shown to lead construction spending for nonresidential buildings by a full year.
emphasis added

Dodge Momentum Index Click on graph for larger image.

This graph shows the Dodge Momentum Index since 2002. The index was at 193.4 in July, down from 195.1 the previous month.

According to Dodge, this index leads “construction spending for nonresidential buildings by a full year”.  This index suggests some slowdown towards the end of 2023 or in 2024.  

Commercial construction is a lagging economic indicator.

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