US household wealth rose $3tn in the first quarter
The value of assets held by US households increased by $3.05tn in the first three months of the year, taking the total assets held by the household sector to $168.5tn. Liabilities rose just $23bn to $19.6tn, leaving net household worth at $148.8tn. Rising equity markets was the main factor leading to the increase, but holdings of debt securities increased $893bn. These factors more than offset the $617bn drop in household wealth in real estate and the $415bn decline in cash, checking and time savings deposits held by US households.
Source: Macrobond, ING
We have to remember that March saw the collapse of Silicon Valley Bank and Signature Bank with deposit flight hitting many of the small and regional banking groups. We have subsequently seen this situation stabilize although some money that would typically be left in banks has been switched to money market funds.
Nonetheless, we do appear to be seeing much of the excess saving built up during the pandemic via stimulus payments and extended and uprated unemployment benefits being eroded – it is now “only” around 1.8tn above where we would expect it to be based on long run trends. This is especially the case now that households have an apparent appetite to spend, particularly on services.
Cash, checking and time savings deposits are reverting to trend ($tn)
Source: Macrobond, ING
After the most rapid and aggressive period of interest rate hikes seen in over 40 years plus the tightening of lending conditions currently being experienced in the US, recession fears are mounting. Households will play a huge role in how prolonged and deep any downturn will be given consumer spending accounts for more than two-thirds of economic activity in the United States.
Household assets and liabilities as a proportion of disposable income
Source: Macrobond, ING
Household assets are 860% of disposable income while liabilities are ‘just” 100% of disposable incomes. While this is down on the peak seen in 1Q 2022 and there are questions over wealth concentration, this is a much better position than any previous recessionary environment and means that the consumer sector should be better able to withstand intensifying economic headwinds. Consequently, we remain hopeful that a likely 2023 recession will be modest and short-lived assuming a swift easing of monetary policy from the Federal Reserve.
Weekly Unemployment Claims Jump to Highest Since October 2021
Initial jobless claims measures the number of individuals who filed for unemployment insurance for the first time during the past week. This morning’s seasonally adjusted 261,000 initial claims was up 28,000 from the previous week’s revised figure. The latest reading came in well above the forecast of 235,000. This is the highest level of initial jobless claims since October 2021.
The 4-w m.a. was declining in recent weeks but the last data point is worrisome, if not revised or a short-term aberration. The dashed line is where claims were in 2019.
(Reuters)
Ackman-Backed Builder Says 48 Lenders Rejected Apartment Project Despite strong demand for rentals, Howard Hughes CEO warns that the pullback from lenders is complicating certain projects.
(…) “Zero showed up and gave me a bid,” he said. “I talked to 48 of them.” (…)
Property developers and owners are grappling with a financing market that’s freezing up as concerns mount about commercial real estate. Owners, particularly of office buildings, are struggling to pay debt as borrowing costs surged, leading to defaults and negotiations with lenders.
Other developers including billionaire Ross Perot Jr. have warned that it’s getting harder for real estate firms to get construction loans. (…)
The pain is extending to apartment landlords, who have benefited from a surge in rent growth during the pandemic. Now, many owners are seeing high borrowing costs and a surge in expenses erase their profits. Prices for apartment buildings have dropped 21% over the past year, according to Green Street.
Lenders are also focused on working out existing loans, while shying away from providing any new ones. That’s complicating apartment projects for developers such as Howard Hughes, even as the firm sees strong demand from renters. The already built part of its Woodlands community is more than 96% leased with double-digit rent growth. (…)
Bi-weekly data through May 31 look ok, even at smaller banks.
