by Calculated Risk on 12/13/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• 2nd Look at Local Housing Markets in November

• Mortgage Rates: The New Normal

• Lawler: More on the “Neutral” Interest Rate (R*)

• December ICE Mortgage Monitor: Home Prices "Firmed" in November, Up 0.8% Year-over-year

• 1st Look at Local Housing Markets in November

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

by Calculated Risk on 12/13/2025 08:11:00 AM

Special Note: There is still uncertainty on when some economic reports will be released.

The key economic reports this week are the November Employment report, October Retail Sales, November CPI, and November Existing Home Sales.

For manufacturing, the December New York, Philly and Kansas City Fed surveys will be released this week.


----- Monday, December 15th -----
8:30 AM: The New York Fed Empire State manufacturing survey for December. The consensus is for a reading of 10.8, down from 18.7.

10:00 AM: The December NAHB homebuilder survey.  The consensus is for a reading of 39, up from 38 the previous month. Any number below 50 indicates that more builders view sales conditions as poor than good.

----- Tuesday, December 16th -----
8:30 AM: Employment Report for November.   The consensus is for 50,000 jobs added, and for the unemployment rate to be unchanged at 4.4%.

There were 119,000 jobs added in September, and the unemployment rate was at 4.4%.

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

8:30 AM ET: Retail sales for October will be released.  The consensus is for a 0.3% increase in retail sales.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

----- Wednesday, December 17th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).

----- Thursday, December 18th -----
8:30 AM: The initial weekly unemployment claims report will be released.  There were 236,000 initial claims last week.

8:30 AM ET, The Consumer Price Index for November from the BLS.  The consensus is for a 0.3% increase in CPI, and a 0.2% increase in core CPI.  The consensus is for CPI to be up 3.1% year-over-year and core CPI to be up 3.1% YoY.

8:30 AM: the Philly Fed manufacturing survey for December. The consensus is for a reading of 2.2, up from -1.7.

11:00 AM: the Kansas City Fed manufacturing survey for December.

----- Friday, December 19th -----
10:00 AM: Existing Home Sales for November from the National Association of Realtors (NAR). The consensus is for 4.15 million SAAR, up from 4.10 million.

The graph shows existing home sales from 1994 through the report last month.

10:00 AM: University of Michigan's Consumer sentiment index (Final for December).

by Calculated Risk on 12/12/2025 04:21:00 PM

A few brief excerpts from a Goldman Sachs research note on shelter inflation:

[R]apid multifamily supply growth amid a cooler labor market, slower immigration, and an already rising vacancy rate is likely to keep new lease rent growth subdued in 2026. ... We forecast that PCE housing inflation will slow to 0.22% month-over-month and 3.4% year-over-year in December 2025 and 0.16% month-over-month and 2.1% year-over-year in December 2026.

Under our forecast, the contribution from shelter inflation to year-over-year core PCE inflation shrinks from 0.7pp in the latest report to 0.6pp by December 2025 and 0.4pp by December 2026, versus 0.6pp on average in 2018-2019.

Here is a graph of the year-over-year change in shelter from the CPI report and housing from the PCE report this morning, both through September 2025.

Housing (PCE) was up 3.7% YoY in September, down from 3.9% in August and down from the cycle peak of 8.3% in April 2023.

Economists at Goldman Sachs expect this will decline to 2.1% YoY by December 2026.  This is a key reason why the FOMC expects inflation to decline in 2026 (along with less impact on inflation from tariffs).

by Calculated Risk on 12/12/2025 11:14:00 AM

Hotel occupancy was weak over the summer months, due to less international tourism.  The fall months are mostly domestic travel and occupancy is still under pressure! 

From STR: U.S. hotel results for week ending 6 December

he U.S. hotel industry reported negative year-over-year comparisons, according to CoStar’s latest data through 6 December. ...

30 November through 6 December 2025 (percentage change from comparable week in 2024):

• Occupancy: 57.2% (-3.2%)
• Average daily rate (ADR): US$160.11 (-0.5%)
• Revenue per available room (RevPAR): US$91.57 (-3.7%)
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2025, blue is the median, and dashed light blue is for 2024.  Dashed black is for 2018, the record year for hotel occupancy. 

The 4-week average of the occupancy rate is tracking well behind last year but is close to the median rate for the period 2000 through 2024 (Blue).

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average will decrease seasonally until early next year.

On a year-to-date basis, the only worse years for occupancy over the last 25 years were pandemic or recession years.

by Calculated Risk on 12/12/2025 08:05:00 AM

Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in November

A brief excerpt:

Tracking local data gives an early look at what happened the previous month and also reveals regional differences in both sales and inventory.

November sales will be mostly for contracts signed in September and October, and mortgage rates averaged 6.35% in September and 6.25% in October (lower than for closed sales in October).

In November, sales in these markets were down 5.7% YoY. Last month, in October, these same markets were up 2.8% year-over-year Not Seasonally Adjusted (NSA).

Important: There was one fewer working days in November 2025 (18) as in November 2024 (19). So, the year-over-year change in the headline SA data will be more than the change in NSA data (there are other seasonal factors).
...
This was just several more early reporting markets. Many more local markets to come!

There is much more in the article.

by Calculated Risk on 12/11/2025 08:25:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Friday:
• No major economic releases scheduled.

by Calculated Risk on 12/11/2025 04:40:00 PM

From Cotality U.S. home equity dips further this fall

Cotality ... today released the Homeowner Equity Report (HER) for the third quarter of 2025. The report reveals a mixed picture of homeowner equity gains across the United States.

Borrower equity decreased year over year, declining by $373.8 billion or 2.1%. That decline translates to an overall net equity to $17.1 trillion for homes with a mortgage. Homeowner equity peaked at close to $17.7 trillion in the second quarter of 2024 and has since oscillated between $17 trillion and $17.6 trillion.

"As the pace of home price growth slows and markets recalibrate from pandemic peaks, we’re seeing a clear shift in equity trends,” said Cotality Chief Economist Dr. Selma Hepp. “Negative equity is on the rise, driven in part by affordability challenges that have led many first-time and lower-income buyers to over-leverage through piggyback loans or minimal down payments. While overall home equity remains elevated, recent purchasers with smaller down payments may now face negative equity.”
...
While the share of homeowners in negative equity reduced in the second quarter of this year, it ticked up again in the third quarter. In the current quarter, 2.2% of homeowners have negative equity or 1.2 million properties. Another way to think about it is that there’s been a 21% year-over-year rise in the number of homeowners in negative equity with 216,000 more homes falling into the category in the third quarter, a trend that has been gaining steam and signals possible market difficulties ahead.

Compared to the second quarter, there has been a 6.7% increase in the number of mortgaged residential properties sitting in negative equity. This slide in equity tracks with market cycles as the spring homebuying season faded into the slower fall market, during which period there’s a more consistent weakness in home price gains across markets.

This graph compares the distribution of equity (and negative equity) in Q3 vs. Q2. 

About 1.2 million properties are in negative equity (owe more than the property is worth), but this is a fairly small percentage historically.

Most homeowners have substantial equity in their homes.

by Calculated Risk on 12/11/2025 01:12:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Mortgage Rates: The New Normal

A brief excerpt:

In June 2023, I wrote: Could 6% to 7% 30-Year Mortgage Rates be the "New Normal"?

At that time, the Fed Funds rate was set at 5 to 5-1/4 percent and the Ten Year Treasury was yielding 3-3/4%. I noted in 2023: “the 10-year yield would likely increase even as the Fed lowers the Fed Funds rate.”

And that is what happened. The 10-year is yielding 4-1/4% this morning. This is a key point. Just because the FOMC is cutting rates, doesn’t necessarily mean long rates will follow.

Note: For a discussion of the R* and the neutral rate, see housing economist Tom Lawler's post on Tuesday.

[I]f, as expected, the FOMC decides to cut its federal funds rate target by 25 bp tomorrow, then the resulting level of the federal funds rate will be very close to the neutral nominal policy rate.

The following graph is from Mortgage News Daily and shows the 30-year mortgage rate since 2000. Rates were in the 5.5% to 6.5% range prior to the housing bust and financial crisis. Then rates were in the 3.5% to 5% range for over a decade prior to the pandemic. Currently rates are at 6.30% for 30-year mortgage rates.

There is much more in the article.

by Calculated Risk on 12/11/2025 10:00:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q3 2025 today.

The results of this survey were significantly distorted by the pandemic in 2020.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers. Analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

National vacancy rates in the third quarter 2025 were 7.1 percent for rental housing and 1.2 percent for homeowner housing. The rental vacancy rate was not statistically different from the rate in the third quarter 2024 (6.9 percent) and not statistically different from the rate in the second quarter 2025 (7.0 percent).

The homeowner vacancy rate of 1.2 percent was higher than the rate in the third quarter 2024 (1.0 percent) and higher than the rate in the second quarter 2025 (1.1 percent).

The homeownership rate of 65.3 percent was not statistically different from the rate in the third quarter 2024 (65.6 percent) and not statistically different than the rate in the second quarter 2025 (65.0 percent).
emphasis added

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st, 1990, 2000, 2010, and 2020. 

The HVS homeownership rate was increased to 65.3% in Q3, from 65.0% in Q2.  

The results in Q2 and Q3 2020 were distorted by the pandemic and should be ignored.

The HVS homeowner vacancy increased to 1.2% in Q3 from 1.1% in Q2.

The homeowner vacancy rate declined sharply during the pandemic and includes homes that are vacant and for sale (so this mirrors the increasing levels of existing home inventory).

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

The rental vacancy rate increased to 7.1% in Q3 from 7.0% in Q2.  This is up from the low of 5.6% in 2021 and 2022.

The quarterly HVS is the timeliest survey on households, but there are many questions about the accuracy of this survey.

by Calculated Risk on 12/11/2025 08:43:00 AM

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $52.8 billion in September, down $6.4 billion from $59.3 billion in August, revised.

September exports were $289.3 billion, $8.4 billion more than August exports. September imports were $342.1 billion, $1.9 billion more than August imports.
emphasis added

Click on graph for larger image.

Exports and imports increased in September. 

Exports were up 6% year-over-year; imports were down 4% year-over-year.

Imports increased sharply earlier this year as importers rushed to beat tariffs.  

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China decreased to $15.0 billion from $31.8 billion a year ago.