Year: 2023

BLACK FRIDAY SALE!

Every service I subscribe to is currently offering Thanksgiving discounts.

Seeking to better my “competition”, after 15 years, here’s the first ever Edge and Odds Thanksgiving sale.

Any new or existing subscriber, any new reader or non-reader, even anybody with zero interest in the blog, will get 50% off the regular price which, remarkably, has not change in 15 years!

This offer will remain valid until next Thanksgiving and will be retroactive to January 3rd, 2009, the launch date, even for those who found me later, or never found me.

And for my numerous non-American readers, for fairness sake, they will be allowed to apply the very same discount, no discrimination, during any other holiday period of their choice, valid until any other holiday period of their choice, and retroactive as far back as they wish.

To take advantage of this offer, simply do nothing. The discount will be automatically applied to your account, even if you don’t have one.

Please allow a reasonable number of days, weeks or months. We have been short-staffed here since day one.

The problem is that I only hire on a profit-sharing scheme and that has yet to appeal to anybody since I still refuse to embellish the blog with ads and pop-ups.

*****

My real Thanksgiving!

Sincere thanks are hereby given to all of you who have helped the blog with donations, large or small, occasional or regular.

I truly appreciate your mark of appreciation and altruistic generosity given that you are a minority helping all Edge and Odds readers.

Getting older, slower and sloppier, busy with 5 children and 11 grand-children, some in other biz with me (or rather me with them), and being short-staffed for reasons given or not above, I often cannot find the time/energy to send a thank you note. I apologize and I will try to improve on that even though I know I should not commit to that.

Rightly or wrongly, I always decide to work on the blog rather than use time to send thank you notes.

But here it is: Marc, Larry, Rick, Patrick, Joseph, Denis, John, Steven, Richard, David, just to name some of the recent donators, I hereby sincerely thank you all and salute your generosity.

To all other free riders, thank you for reading me, a very nice compliment in itself.

Denis

*****

The Fed Wants More Evidence Before Changing Rate Stance Officials highlighted risks of stronger-than-anticipated inflation and weaker-than-expected growth at their recent meeting

Federal Reserve officials were unwilling to conclude they were done raising interest rates when they decided earlier this month to extend a pause in rate increases.

But minutes of their most recent policy meeting suggested they might be comfortable holding rates steady for at least the rest of the year.

“All participants agreed that the committee was in a position to proceed carefully,” said the minutes of the Oct. 31-Nov. 1 meeting released on Tuesday. “Participants expected that the data arriving in coming months would help clarify the extent to which” a slowdown in inflation was continuing amid higher borrowing costs, the minutes said.

Since officials last met, none have made a strong case to lift rates at their next meeting, Dec. 12-13, even though several have said it was too soon to change their view that another rate increase is more likely than a rate cut.

The minutes said officials then generally saw the risks of raising rates too much versus raising them too little as better balanced than earlier this year. They continued to see risks of higher-than-expected inflation and lower-than-expected growth, the minutes said. (…)

The minutes said officials needed to see more evidence to “be confident that inflation is clearly on a path” to the Fed’s 2% target, which is calculated using a separate inflation gauge from the Commerce Department. (…)

Home Sales Fell to a New 13-Year Low in October

Existing-home sales for the full year in 2023 are on track to be the lowest since at least 2011, according to economist forecasts.

Existing-home sales, which make up most of the housing market, decreased 4.1% in October from the prior month to a seasonally adjusted annual rate of 3.79 million, the lowest rate since August 2010, the National Association of Realtors said Tuesday. October sales fell 14.6% from a year earlier. Sales have been near 2010 levels in recent months. (…)

The national median existing-home price rose 3.4% in October from a year earlier to $391,800, NAR said. (…)

Nationally, there were 1.15 million homes for sale or under contract at the end of October, up 1.8% from September and down 5.7% from October 2022, NAR said. That was the lowest inventory level for any October in data going back to 1999, Yun said. At the current sales pace, there was a 3.6-month supply of homes on the market at the end of October. (…)

The typical home sold in October was on the market for 23 days, up from 21 days a year earlier, NAR said. (…)

About 29% of October existing-home sales were purchased in cash, up from 26% in the same month a year ago, NAR said. (…)

(CalculatedRisk)

Shoppers Are Dipping Into Their Savings This Holiday Season Data company sees higher spending in November and December

Spending will rise 0.4% on a monthly basis during the holidays, according to an economic outlook from Caden, a data platform that pays 50,000 users to track their real-time spending. While that’s lower than recent months, it shows that consumption is still on the rise.

Higher outlays are predominantly being fueled by personal savings instead of debt, Caden’s findings show. The trend “is a response to the economic reality that people’s incomes are struggling to keep pace with the escalating costs of goods and services due to inflation,” according to a summary of the study’s findings from the company. Leftover balances from the economic stimulus packages of the pandemic have encouraged consumers, according to John Roa, Caden’s chief executive officer.

The problem is that this trend won’t last.

“The question is when the party runs out and those savings run out, where is it going?” Roa said. “We are seeing a paycheck-to-paycheck world. It’s not going to take long for that to dwindle.” (…)

From my Nov. 6 post Really Slowing?

Could savings save the day? Unlikely this time.

The savings rate fell to 3.4% in September, meaningfully lower than the 6.5% pre-pandemic average. It has very, very, very rarely, been lower…

…but even more rarely if we also account for consumer interest payments.

This next chart plots personal expenditures plus interest payments as a % of disposable income. It was 95.4% in September, very uncomfortably high looking at the last 30 years and significantly higher than pre-pandemic levels.

Total spending has already unusually diverged from disposable income (left chart) which is now 4% lower than expenditures. Whatever excess savings (deposits) remain, they are illusory since their purchasing power has been totally eroded by inflation.

• Best Buy’s sales slumped as demand for consumer electronics wanes. (Reuters)
• American Eagle and Abercrombie & Fitch also provided cautious guidance [yesterday] following similar remarks from other retailers that recently reported earnings. (Ed Yardeni)

Chicago Fed: Economic Growth Declined in October

The Chicago Fed National Activity Index (CFNAI) dropped to -0.49 in October from -0.02 in September. All four broad categories of indicators used to construct the index decreased from September and all four categories made negative contributions in October. (…)

The next chart highlights the +0.7 and -0.7 levels. The two callouts explain the significance of these parameters according to the Chicago Fed. (…)

Bloomberg

Canada’s inflation rate slowed to 3.1% in October, but rents surge

The Consumer Price Index rose 3.1 per cent in October from a year earlier, down from 3.8 per cent in September, Statistics Canada said Tuesday in a report. The result matched analysts’ expectations and was largely driven by gasoline prices, which tumbled 6.4 per cent over the month. Adjusted for seasonality, the CPI fell 0.1 per cent on a monthly basis. (…)

Prices for services rose at an annual pace of 4.6 per cent in October, accelerating from 3.9 per cent in September. (…)

Rents jumped by an annual rate of 8.2 per cent in October, up from 7.3 per cent in September. (This was the largest 12-month increase since Statscan changed its methodology for tracking rents in early 2019.) (…)

Excluding housing costs, the CPI increased by just 1.9 per cent annually in October. (…)

Goldman Sachs:

Excluding food and energy, CPI edged up by 0.2pp to +3.4% yoy. BoC-preferred CPI-Trim and CPI-Median declined respectively to +3.5% and +3.6% on a yoy basis and to +3.2% and +2.7% on a three-month average annualized basis.

On a seasonally adjusted monthly basis, headline CPI inflation declined to -0.1% in October from +0.1% in September. Monthly CPI inflation ex food and energy rose to +0.3% (vs. +0.2%), reflecting an acceleration in rent inflation, one-off adjustments in property charges, and an uptick in travel-related categories from low levels.

Today’s print confirmed the stepdown in sequential underlying inflation and should keep the BoC on hold in December and 2024H1.

NBF:

Canada’s record housing supply imbalance, caused by an unprecedented increase in the working-age population (874,000 people over the past twelve months), means that there is currently only one housing start for every 4.2 people entering the working-age population, a 5 standard deviation from the historical ratio of 1 housing unit started for every 1.8 people.

Under these circumstances, people have no choice but to bid up the price of a dwindling inventory of rental units. The current divergence between rental inflation (8.2%) and CPI inflation (3.1%) is the highest in over 60 years.

As today’s Hot Chart shows, there is no precedent for the peak in rental inflation to exceed the peak in headline inflation. Unless Ottawa revises its immigration quotas downward, we don’t expect much relief for the 37% of Canadian households that rent.

In the USA where immigration is not as problematic:

Eurozone property debts worse than pre-financial crisis, warn ECB

Commercial property companies in the eurozone have worse debts than they had before the global financial crisis in 2008, the European Central Bank (ECB) has said, as it warned the sector could struggle for years under the weight of high interest rates.

A commercial real estate boom is now unravelling in countries like Germany and Sweden, the ECB outlined in a report that examines the impact of the currency bloc’s record high interest rates, which stand at 4pc.

It said eurozone banks have around 10pc of loans exposed to the commercial property sector, which is grappling with declining profitability as it faces “a higher likelihood of facing debt servicing challenges” compared to the residential market, which is supported by a strong employment. (…)

The report added that commercial property could “play a significant amplifying role in the event of broader market stress” as larger firms grapple with debt levels “close to or above pre-global financial crisis levels”.

It comes as deep cracks emerged in the property market of the eurozone’s largest economy, Germany, where the construction of one of the country’s tallest buildings has suddenly halted midway after the developer stopped paying its builder. (…)

• German Budget Chaos Puts Industry’s Green Overhaul at Risk Spending freeze is blocking funds for EVs, steel plants

Germany’s emergency spending freeze is blocking funds for next-generation auto-industry and steel plants, jeopardizing the push to re-engineer Europe’s economic engine.

Berlin halted new spending authorizations this week after Germany’s top court ruled that some €60 billion ($65.7 billion) can’t be transferred into a green-technology fund. The money was earmarked for a range of projects including decarbonizing steel production and major semiconductor works led by Intel, TSMC and Infineon.

Sweden’s Northvolt AB was also due to receive part of pledged subsides from the climate fund for an EV battery plant in northern Germany, according to two people familiar with the situation. (…)

Germany is forecast to be the weakest alongside Italy among major euro-zone nations this year, and the spending issues are sowing further uncertainty. (…)

Last week’s ruling cast doubt on Germany’s entire financing plans, and senior officials have canceled some public appearances to deal with the upheaval. (…)

China Growth Accelerates in November China Services Looking Good. Manufacturing Lagging

The Chinese economy appears to be on the move again. Significant growth is evident in the Services sector. And Manufacturing, despite some companies still impacted by the after effects of Covid, is becoming more positive about the future.

The Services sector results from the latest Sales Managers Survey are very positive. The Market Growth Index is at a 25 month high. The Sales Growth Index is also up at an 8-month high, but more important, the Index registered a very high reading of 54.7 indicating rapid month on month expansion.

A recovery in confidence is also evident from the significant growth in November in job recruitment, with the Index now at a 26-month high.

Finally, the overall Services Index, which brings together the various readings from the individual indexes, is also reflecting significant growth, with the November reading at a 21 month high.

The Manufacturing survey results continue to suggest that the sector has problems, with a considerable number of companies citing some Covid related supply problems. But the rising Business Confidence Index, now at an 8-month high, suggests that a resumption of growth is likely in the early part of 2024.

Furthermore, price inflation seems to be a thing of the past, with the Manufacturing Price Index remaining below the 50 “no growth” line. And finally, the overall Sales Managers Manufacturing Index is now over the 50 “no growth” line and into positive territory.

In summary, the Chinese economy has some way to go before it’s growth starts to recall the heady days of 6%+ annual GDP growth. But there seems little doubt that in November, the large Services sector grew rapidly, and the Manufacturing sector is once again off the ground, with growing confidence building in many areas.

• Less than 30% of Japanese firms plan China expansion – survey

The number of Japanese firms planning to expand in China has fallen to less than 30% for the first time, according to a survey published on Tuesday, with economic slowdown, increasing competition and geopolitical tension putting many off.

The waning appetite for Japanese businesses to augment operations in Japan’s biggest trade partner, alongside the United States, underscores fraught bilateral ties between the east Asian neighbours.

In an annual survey by the Japan External Trade Organisation, a semi-governmental export promotion agency, 27.7% of 710 companies said they were expecting to expand operations in China in the next a year or two.

The percentage declined from 33.4% last year and 40.9% in 2021.

Some 31 firms attributed their downsizing to economic uncertainty and a sluggish market, while 15 blamed a slump in Japanese auto sales in China, the world’s top car market. (…)

Seven firms also noted rising geopolitical risks, with bilateral relations, rarely smooth, have been particularly strained over recent months.

China last month arrested a Japanese executive, an employee of Japanese drugmaker Astellas Pharma (4503.T), on suspicion of espionage. The arrest has had a chilling effect on business, Japanese officials say. (…)

• China Puts Country Garden on Draft List of Builders to Support Move signals financing help for defaulted real estate firms.

Country Garden Holdings Co. and Sino-Ocean Group have been included on China’s draft list of 50 developers eligible for a range of financing support, according to people familiar with the matter, signaling a pivot by Beijing to help some of the nation’s most distressed builders.

CIFI Holdings Group Co., another builder that has missed debt payments, was also included on the so-called white list, the people said, asking not to be identified because the matter is private. Regulators are set to finalize the roster and distribute it to banks and other financial institutions within days, the people said, adding that some details could change. (…)

• Chinese Developer Sunac Gets Loan From Huarong as Support Ramps Up

Sunac China Holdings Ltd. secured funding for one of its property units from a government-backed asset manager, in a further sign of support for the beleaguered real estate sector in China.

Shanghai Haolong agreed to a three-year loan of up to 3.5 billion yuan ($490 million) for a homebuilder half-owned by a Sunac subsidiary, according to an exchange filing Tuesday. Haolong is partially backed by China Huarong Asset Management Co., one of China’s biggest bad-debt managers. (…)

Sunac, the nation’s third-largest developer in 2021, was among the developers that defaulted, and this week became one of the first to complete a debt restructuring. The firm won court approval for a plan that covers an estimated $10.2 billion of creditor claims, $5.7 billion of which would be compensated with new dollar bonds. (…)

In Monday’s CHINA IMPLODING? NO, EXPLODING!, I noted President Xi’s first ever visit to the PBOC on Oct. 24 as well as the same day visit of vice premier He Lifeng to the China’s sovereign wealth fund. These were not impromptu courtesy visits, signs of an orchestrated strategy to seriously address the housing crisis.

Binance Founder Pleads Guilty, Steps Down as CEO Changpeng Zhao pleaded guilty to violating criminal U.S. anti-money-laundering requirements. Binance admitted wrongdoing and agreed to pay fines totaling $4.3 billion.

The chief executive of Binance, the largest global cryptocurrency exchange, stepped down and pleaded guilty to violating criminal U.S. anti-money-laundering requirements, in a deal that might preserve the company’s ability to continue operating, according to court documents.

Changpeng Zhao appeared in Seattle federal court Tuesday and entered his plea, according to court records. Prosecutors accused Binance, which Zhao owns, of facilitating transactions with sanctioned groups. Binance encouraged U.S. users to obscure their location so the firm could avoid complying with U.S. anti-money-laundering laws, prosecutors said. (…)

Zhao has agreed to pay a criminal fine of $50 million, although that amount might be reduced based on separate civil penalties he has agreed to pay, court records show. Zhao’s plea agreement isn’t publicly available yet. (…)

Zhao faces a maximum prison sentence of 18 months under federal sentencing guidelines. He will be sentenced at a later date.

The outcome resembles an earlier case that prosecutors brought against the executives of BitMEX, an exchange for trading crypto derivatives that was based in the Seychelles. Its former chief executive, Arthur Hayes, pleaded guilty to violating anti-money-laundering law and was later sentenced to two years of probation, avoiding a possible prison term of six to 12 months. (…)

The deal announced Tuesday doesn’t include a settlement with the Securities and Exchange Commission, which sued Binance and Zhao in June and alleged it violated U.S. investor-protection laws, the people said. Major crypto exchanges such as Binance have decided to litigate with the SEC, believing they can show that cryptocurrencies don’t qualify as the kinds of investments overseen by the SEC. (…)

CB Leading Economic Index: Recession Signal Resumes as Index Declines Further

The latest Conference Board Leading Economic Index (LEI) fell for a 19th consecutive month in October as the LEI resumed signaling a recession in the near term. The index dropped 0.8% from last month to 103.9, the index’s lowest reading since May 2020.

“The US LEI trajectory remained negative, and its six- and twelve-month growth rates also held in negative territory in October,” said Justyna Zabinska-La Monica, Senior Manager, Business Cycle Indicators, at The Conference Board.

“Among the leading indicators, deteriorating consumers’ expectations for business conditions, lower ISM® Index of New Orders, falling equities, and tighter credit conditions drove the index’s most recent decline.

After a pause in September, the LEI resumed signaling recession in the near term. The Conference Board expects elevated inflation, high interest rates, and contracting consumer spending—due to depleting pandemic saving and mandatory student loan repayments—to tip the US economy into a very short recession. We forecast that real GDP will expand by just 0.8 percent in 2024.” More

The Conference Board Coincident Economic Index® (CEI) for the U.S. was unchanged in October 2023 at 110.8 (2016=100), but the index is below its September’s level after a downward revision. The CEI is now up 0.9 percent over the six-month period between April and October 2023, compared to 0.4 percent growth over the previous six months.

The CEI’s component indicators—payroll employment, personal income less transfer payments, manufacturing and trade sales, and industrial production—are included among the data used to determine recessions in the US. Three out of four components of the index advanced in October, with personal income less transfer payments being the strongest contributor, followed by manufacturing and trade sales and employees on nonagricultural payroll. Industrial production was the only negative contributor in the month.

Wells Fargo:

The Leading Economic Index (LEI) is supposed to make it easy to keep tabs on the economy, so why is making sense of it so hard? (…)

After 19 straight monthly declines, usually we’d be in a recession by now. We looked at the peak-to-trough declines in this bellwether in prior cycles to find a similar period, and we found one. Between April 2000 and October 2001, the LEI contracted 12.1%. We’ve very nearly matched the magnitude of that decline in this cycle. Through today’s October numbers, the LEI is down 11.7%. (…)

The sustained warning from the LEI has been at odds with the resilience in broad economic activity, but we remain cautious to wave it all off as an anomaly no matter how fast the economy grew in Q3. The nearby chart that lines up the cycle turning points also reveals some big divergences in the 1990s.

The LEI broke through the zero line during the mid-cycle slowdown in 1995 and touched it again during the so-called Asian contagion in 1998 when volatility in foreign fixed income and FX markets caused a scare, yet there wasn’t a recession in either of those periods.

When looking at the peak to trough changes, the LEI tends to overshoot the contraction in GDP, yet larger LEI declines are typically met with worse economic contractions. The point being: growth in the LEI and GDP don’t always move in step, though the divergence today is clearly larger than most. (…)

As is now better understood, the LEI is heavily skewed to the goods sector, currently in near recession as the inventory cycle runs its course. Services are still in their post-Covid recovery phase.

But something is shifting.

On November 6, I posted Really Slowing?, underscoring the weak October Services PMIs coming right after the much weaker employment and wage data for the August to October period after the BLS revised August and September jobs down 101k (-18%).

Now, weak consumer economics indicate difficult demand conditions ahead. The October PMIs confirm the sudden change, across the board, but particularly in services, supposed to take the slack from goods:

Services PMI:

• subdued sales environment
• muted demand conditions
• New orders fell for the third month running
• reports of discounting
• increasing requests for concessions and discounts

Manufacturing PMI:

• demand conditions were historically muted overall, with firms downwardly adjusting their output expectations for the year ahead and cutting employment for the first time since July 2020
• Workforce numbers fell for the first time in 39 months, and at the fastest pace since June 2020, as firms chose not to replace voluntary leavers.
• Efforts to remain competitive and drive sales reportedly constrained pricing power.
• Goods producers ran down their stocks of finished items and purchases again in October. A slower fall in postproduction inventories was in part linked to weaker than anticipated order growth and continued processing of backlogs. Firms also reduced their input buying further.

On November 1st, Bloomberg had this other warning:

• Warnings on Weak Demand Are Piling Up This Earnings Season Earnings management calls are plagued with demand concerns

At just over the half-way mark of the reporting period, “weak demand” is among the top trending phrases on earnings calls, according to a Bloomberg analysis of transcripts for the S&P 500 and the Stoxx Europe 600 benchmarks. If the pace of mentions holds for the next few weeks, it would be the most on record, according to data compiled by Bloomberg going back to 2000.

From the horses’ mouths (via The Transcript):

• “Although our third quarter volume trends were slightly better than expected, we did observe softening consumer demand in September that carried through October…Given these trends, our base-case expectation is a continued pressure on discretionary demand will lead to a relatively muted seasonal uptick in volumes during the holiday season.” – eBay ($EBAY ) CFO Stephen Priest
• “I would say, at the same time, the back half of our — since the call, the back half of our October was softer than we expected.. So at the time, a couple of weeks back, we gave an estimate of a growth rate that would look similar to September, and that’s sort of where we had been running at the time.. The back half was softer.. So we did see that.” – MSC Industrial Direct ($MSM ) CEO Erik Gershwind
• “Recently, we’ve experienced a higher degree of variability in weekly performance in between holiday events in the US. Including seeing a softening in the back half of October that was off trend to the rest of the quarter…this gives us reason to think slightly more cautiously about the consumer versus 90 days ago” – Walmart ($WMT ) CFO John Rainey
• “…throughout Q2, in line with what our peers have been saying, you know, we did see a deterioration. I think it was really September where we particularly noticed, the the global slowdown, and I think as indicated by our guidance, fair to say those trends have have continued into the quarter.” – Burberry ($BURBY) CEO Jonathan Akeroyd
• “Big-ticket comp transactions or those over $1,000 were down 5.2% compared to the third quarter of last year. We continued to see softer engagement in big-ticket discretionary categories like flooring, countertops and cabinets. However, we saw big-ticket strength in Pro-heavy categories like roofing, insulation and portable power.” – The Home Depot ($HD ) EVP of Merchandising William Bastek
• “Overall, consumers are still spending, but pressures like higher interest rates, the resumption of student loan repayments, increased credit card debt and reduced savings rates have left them with less discretionary income, forcing them to make trade-offs in their family budgets. For example, this year, we’ve seen more and more consumers delaying their spending until the last moment. Guests who previously bought sweatshirts or denim in August or September are deciding to wait until the weather turns cold before making a purchase. This is a clear indication of the pressures they’re facing as they work to stretch their budgets until the next paycheck” – Target ($TGT ) CEO Brian Cornell
• “We’re not seeing a major distinction between our channels, across channels. The aspirational consumer is under more pressure on a relative basis. They’re being more choiceful.” – Tapestry ($TPR ) CFO Joanne Crevoiserat
• “…we are operating in a pretty cautious consumer environment, and we took the opportunity to put a little of that caution into our guidance.” – BJ’s Wholesale Club Holdings ($BJ ) CFO Robert Eddy
• “…if you look at the consumer, it’s really the tale of two sides. The over 75,000 consumer continues to be healthy. We continue to see traffic growth in that segment. We’re holding our share in that segment. Under 75,000 consumers a little more stressed, especially as you go down the income core, it gets even more stressed…From a trade-down perspective, we are seeing some trade down from mid-scale casual and sit-down into QSR. But we’re also seeing some trade out of the category from the lower-income consumer out of QSR and into food at home. So it was kind of wash each other out along the way.” – The Wendy’s Company ($WEN ) CEO Todd Penegor
• This a.m.: Lowe’s misses Q3 expectations, cuts sales outlook as homeowners take on fewer projects. (CNBC)

Thursday we get the November flash PMI.

From last Friday’s tally, not a major worsening trend:

Houses Too Expensive to Buy Underpin Lofty Rents Single-family home rents are rising more than apartments this year.

Big public companies that rent out single-family homes are beating the rest of the rental market this year, thanks to tenants who are paying large rent increases on the sorts of homes they increasingly can’t afford to buy.

Landlords Tricon Residential, Invitation Homes and AMH, which together own about 180,000 rental homes, each posted rent increases greater than 6% for the third quarter over the same period a year prior. 

That was about twice as much as the average increase for rental homes in September, compared with the same month last year, according to separate indexes from data firm CoreLogic and online-listing company Zillow.

Tricon Chief Executive Gary Berman attributed his firm’s gains in part to record-high home prices that are steering more would-be single-family home buyers toward rental houses.

“In such a distorted environment for home buyers, the case for rental is more compelling than ever,” he told investors and analysts earlier this month.

Tenants in single-family homes also move less often than apartment renters, and may be more willing to absorb rent increases if their families feel settled into a neighborhood and school system.

Apartment rents shot up about 15% in 2021 and continued rising at an above-typical pace in 2022. That growth has been moderating and has even turned negative compared with last year, according to some metrics, as record new apartment construction has helped slow apartment-rent advances in many parts of the country.

Mid-America Apartment Communities, a publicly traded apartment landlord, reported a 2.2% decline in new-lease rents in the third quarter, compared with the same quarter a year ago. (…)

The average mortgage payment is now 52% higher than the average monthly rent check, according to a recent analysis by real-estate brokerage CBRE. Affordability, measured as a ratio of income to home-purchase costs, is at the worst level for buyers since at least 1985, according to John Burns Research & Consulting. (…)

Edge and Odds readers have read that story many times in recent years. But, once again, I must set the rental record (facts) straight. Mid-America Apartments’ “2.2% decline in new-lease rents in the third quarter” does not compare with the 6% renewal rent increases that single-family renters achieved. Per the BLS, renewals are 90%+ of all leases.

Apples-to-apples, MAA’s “same-store” renewals were at +6.2% YtD in October and +5.0% in Q3. Single-family renewals ran at +6.8% in Q3 (average of the 3 public cos.).

BTW, MoM growth in new leases is on an upswing since mid-year:

• The US Housing Market Has Become an Impossible Mess Americans with cheap loans don’t want to sell. Those without homes can’t afford to buy. Will anything budge?

  

• U.S. home vacancies near all-time lows (Axios)

One gauge of the tightness of the U.S. housing market — the percentage of homes that are vacant — fell to the lowest level on record in August, and ticked up only slightly in September.

Data: U.S. Census Bureau; Chart: Axios Visuals

FYI, also from Axios:

America’s aging homebuyers

• As housing gets more expensive, the median homebuyer age has jumped 10 years — to 49 — in two decades, Axios’ April Rubin writes from new National Association of Realtors data.
• The average household income for homebuyers jumped to $107,000, up $20,000 from last year.

Rising college costs, shaky job security and the burden of retirement savings “have made it more difficult for younger people to establish a foothold with their personal finances,” BankRate senior economic analyst Mark Hamrick says.

Here’s some even more interesting stats:

The Share of Americans Who Are Mortgage-Free Is at an All-Time High Almost 40% of US homeowners own their homes outright as of 2022—many of them baby boomers who refinanced when rates were low.

The share of US homes that are mortgage-free jumped 5 percentage points from 2012 to 2022, to a record just shy of 40%. More than half of these owners have reached retirement age. Freedom from mortgage debt gives them the option to age in place—or uproot to sunnier climes. (…)

The number of mortgage-free, single-family homes and condos increased by 7.9 million from 2012 to 2022, to 33.3 million, according to Census Bureau data analyzed by Bloomberg.

As baby boomers age, they’re snapping up—or holding on to—a larger share of homes overall. Of the 84.6 million owner-occupied homes that existed in 2022, almost 33% were owned by people age 65 or older, a 4.6-percentage-point increase from 10 years earlier. (…)

Some mortgage-free boomers say they feel less pressure to downsize as they reach retirement age and are electing to stay put. Nevertheless, many older Americans are opting to sell their homes in pricier regions and use the proceeds to fully pay for a new home in the Sun Belt, where construction is booming and the proportion of no-mortgage homes is among the highest in the country.

Of the 4.1 million new homes built in the US from the start of the pandemic through 2022, 29% were in Florida and Texas, according to Census Bureau figures that include rental properties. In both states the share of fully paid-up homes tops 43%. (…)

It’s thus not only the mortgage handcuffs that restrict housing supply. Older mortgage-free folks like me are simply staying put longer.

China Drafts List of 50 Property Firms Eligible for Funding

China Vanke Co., Seazen Group Ltd. and Longfor Group Holdings Ltd. are among companies that have been named in a draft of the so-called white list, the people said, asking not to be named because the matter is private.

The list, which includes both private and state-owned developers, is intended to guide financial institutions as they weigh support for the industry via bank loans, debt and equity financing, the people said. It couldn’t be determined which other developers were included on the draft list. (…)

China’s biggest banks, brokerages and distressed asset managers were told to meet all “reasonable” funding needs from property firms at a Friday gathering with the top financial regulators, according to a government statement that didn’t mention a white list. Financial firms were also asked to “treat private and state-owned developers the same” when it comes to lending. (…)

Instead of a bazooka, China has resorted to a trickling of policies to address property funding and sales challenges. They include mortgage-easing for homebuyers, down-payment reductions, income tax rebates, a push for urban infrastructure upgrades and affordable housing, and a 200 billion yuan special loan pledge to ensure projects are delivered. The measures however have failed to reverse the slump in the sector. (…)

• Property Developer Sunac China Kicks Off a $10 Billion Debt Restructuring Plan

Sunac China, a real-estate giant that used to be one of the country’s largest property companies by sales, said it has commenced a restructuring plan that covers $10 billion in offshore debt.

Sunac’s update was welcome news for investors, after China Evergrande Group was forced to scrap its $35 billion debt-restructuring plan in September. (…)

The plan involves converting some bonds into shares or equity-linked instruments and exchanging others into new notes. It received strong support from creditors and was approved by a Hong Kong court in early October. (…) (WSJ)

• Chinese births at risk of falling below 9m in accelerating crisis With economic anxiety and expensive education, youth choose to remain childless

“China’s newborns have declined by 40% over the past five years, and the number of births in 2023 will be over 7 million or over 8 million at most,” Qiao Jie at Peking University’s medical school was quoted as saying in August by Chinese media.

A researcher at YuWa Population Research estimates 8.5 million births.

Chinese births dropped below 10 million for the first time in 2022, hitting 9.56 million. The number was down 50% from a recent high in 2016, when the government allowed all couples to have a second child. A drop in 2023 would mark a third consecutive annual decline and the lowest figure since Communist Party rule began in 1949. (…)

Of the children born in 2022, 46% were firstborns, China’s National Health Commission reports. This ratio has remained below 50% since 2019. The 4.41 million firstborns reported in 2022 were down 49% from 2019, suggesting that many couples are opting to remain childless.

China essentially dropped its birth restrictions in 2021 by letting couples have a third child, but the policy reversal had a limited effect. The number of newborns who were not a couple’s first child totaled 5.15 million, down 43% in five years.

Beijing’s past “one-child” policy had the consequence of reducing the number of future mothers. Nikkei’s estimates based on the 2020 census show women in the childbearing ages of 20-39 declining by nearly 20% in the decade through 2030. The decline in births likely will continue, with fewer women able to have children.

An increase in divorce is also likely to contribute to the birth decline. China’s Ministry of Civil Affairs reports 1.97 million divorces from January to September this year, up 25% from the same period in 2021. (…)

The number of marriages from January to September increased 4% on the year. The figure is expected to rise for the full year for the first time in 10 years, but it will remain at a low level. (…)

A declining birthrate can lead to labor shortages in the long run. To address this, the government has included raising the legal retirement age in its five-year policy plan through 2025. (…)

Raising the retirement age faces persistent public opposition. Older generations fear their pension benefits will decrease, while younger people are wary the change would deprive them of employment opportunities.

Did you miss yesterday’s CHINA IMPLODING? NO, EXPLODING! ?

COVID

Katelyn Jetelina from Your Local Epidemiologist:

(…) I was surprised by a KFF report last week: 1 in 2 Americans still take precautions for the holiday season. Some groups do more than others, but there is a little bit of everything from everyone.

Axios:

About 6 in 10 U.S. adults who previously got a COVID-19 vaccine haven’t received an updated shot this fall — and about half don’t plan to get one, Axios’ Jason Millman reports from a new KFF survey.

The survey shows decreasing public concern about COVID as respiratory virus season begins.

• 19% of previously vaccinated Democrats said they won’t get the updated vaccine, compared to 43% of Republicans.

Data: KFF; Chart: Axios Visuals