Wednesday, February 24, 2021

New home sales rise m/m, but signal caution for housing market going forward


 - by New Deal democrat

New home sales increased to a three month annualized high of 923,000 in January. This is of a piece with the positive news last week on housing permits. At the same time, the pace remains below the recent high of 979,000 annualized set six months ago in July. The below graph compares housing starts (blue) with the much less volatile single family permits (red) and the even more volatile, and heavily revised, new home sales (gold), normalized to 100 as of January 2020:

The reason to pay attention to new home sales is that, despite their volatility, they tend to peak and bottom before any other housing metric including permits and starts. So the fact that they have not made a new high in 6 months adds a note of caution to the otherwise sizzling housing market.

New home sales also tend to be more responsive to changes in mortgage rates.  Recently these have begun to increase, following longer term US treasury rates (shown inverted YoY% change) higher:

Note that in 2014, when mortgage rates rose by about 1%, permits never declined significantly YoY. But new home sales did.

If interest rates plateau, or continue to rise, this is the first yellow flag that permits and starts may stall as well - and, based on historical trends, will do so while home prices are still rising.

Tuesday, February 23, 2021

Coronavirus dashboard for February 23: vaccinations start to have a dramatic effect


 - by New Deal democrat

Total US coronavirus deaths: 500,310

Total US confirmed infections: 28,190,159

Total US vaccinated (at least 1 dose): 44,138,118
Total US vaccinated (both doses): 19,438,495

The good news is, roughly 9.5% of the US population age 18 or over has received both doses of a vaccine. Over 20% has received at least one dose.

The bad news is that we have reached the milestone of half a million dead. Further, probably at least 40,000,000 people have been infected, since many who have no or mild symptoms don’t ever get tested.

Here’s the graph of the 7 day average of new infections and deaths for the US over the last 12 weeks:

While there has been a decline of over 2/3’s in infections, and 40% in deaths, this only puts us even with the very worst levels of the summer outbreak.

But there is increasingly dramatic evidence that the vaccines are having a real impact. Since the elderly in long term care facilities were the first to be vaccinated, that is where we would first expect to see an impact. And here it is, graphically:

New infections have declined by nearly 90% in these facilities since vaccinations began, and are lower than they have been since at least 8 months ago.

Here is a similar graph from one week ago, showing the percent of all coronavirus cases that arose from long term care facilities:

The share of total cases declined by 50%. But since, over the same time span, *total* cases themselves declined 50%, that means that the total number of cases in long term care facilities declined by roughly 75%!

The situation is similar in bellwether Israel, which has delivered doses equivalent to about 80% of its total population since December. Deaths are down over 60%:

And when those who have been vaccinated are compared with those in similar situations who have not been vaccinated, the outcome is even more dramatic:

The 7 day average of those who were vaccinated declined by about 2/3’s, while the decline among those not vaccinated was only 10%.

There is simply no reasonable doubt that, as matters now stand, the vaccines are going to be very effective, probably by the Fourth of July, in nearly halting deaths due to the virus in the US - and that includes the new variant strains.


Monday, February 22, 2021

You’re reading the right blog: 2021 economy edition

 - by New Deal democrat

“You’re reading the right blog” is an old chestnut (for me anyway) that I used to say from time to time to highlight a correct forecast that your (not so?) humble blogger made well in advance of more widely read sources.

Well, please bear with me for one more self-pat on the back.

For at least 6 months, I have been saying that the economy was poised to pick up strongly in 2021 once the pandemic loosened its grip. Most recently I repeated that in my short term and long term forecasts for 2021 over at Seeking Alpha.

And this morning, January’s index of leading indicators came in at plus 0.3%, the 9th positive reading in a row:

If the next 3 months are simply unchanged, the YoY comparison is going to be the most positive in two decades.

Meanwhile, as Bill McBride has pointed out, both public and Wall Street forecasts for q/q Q1 GDP are, well, through the roof:

Merrill Lynch: 5.5%
Goldman Sachs: 6.0%
NY Fed nowcast: 8.3%
Atlanta Fed GDP now: 9.5%

(Note: all forecasts SAAR)

The only other times in the past 75 years when the q/q change has been this high were in 1950 and 1978, plus the Q3 rebound last year from the Q2 lockdowns:

So, ... ahem ... you’ve been reading the right blog.