by Calculated Risk on 12/31/2024 05:07:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family and Multi-Family Serious Delinquency Rates Increased in November

Excerpt:

Happy New Year! Best wishes for 2025, Bill

Single-family and multi-family serious delinquencies increased in November.
...
Here are the multi-family 60+ day delinquency rate since 2006.

Freddie Mac (blue) reports that the multi-family delinquencies rate increased to 0.40% in November, up from 0.40% in October, and down from the recent peak of 0.44% in January 2024.

Fannie Mae (red) reports that the multi-family delinquencies rate increased to 0.61% in November, up from 0.57% in October, and is at the highest rate since 2011 (excluding pandemic).

There is much more in the article.

Weekly Schedule

by Calculated Risk on 12/31/2024 01:13:00 PM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

4) Participation Rate: In November 2024, the overall participation rate was at 62.5%, down year-over-year from 62.8% in November 2023, and below the pre-pandemic level of 63.3% in February 2020. Long term, the BLS is projecting the overall participation rate will decline to 61.2% by 2033 due to demographics. What will the participation rate be in December 2025?

The overall labor force participation rate is the percentage of the working age population (16 + years old) in the labor force.   A large portion of the decline in the participation rate since 2000 was due to demographics and long-term trends.

The Labor Force Participation Rate in November 2024 was at 62.5% (red), down from the pre-pandemic level of 63.3% in February 2020, and up from the pandemic low of 60.2% in April 2020. (Blue is the employment population ratio).

From February 2020 to April 2020, 12 million people had left the labor force due to the pandemic.   By November 2024, the labor force was about 4 million higher than the pre-pandemic high.  

The labor force is from the BLS household survey, and this survey probably missed some of the net immigration over the last few years.  From housing economist Tom Lawler:

For those who follow the household survey employment number along with the nonfarm payroll survey numbers, it is worth noting that the housing survey numbers are “controlled” to the latest Census population estimates and one-year ahead projections. As such, the 2024 household employment numbers are “controlled” to the Vintage 2023 employment projections for 2024. The Vintage 2023 projection for YOY resident population growth from December 2023 to December 2024 was 1,724,847, compared to the Vintage 2024 projection over this period of 2,745,741. As such, when the household survey employment estimates for the end of this year are revised in January to reflect population benchmark revisions, one should expect a sizable upward revision.

This will revise up the number of people employed in the household survey however this will not impact the participation rate.

Population growth had been weak in the 2010s, but picked up over the last few years, primarily due to more immigration.   However, net immigration slowed in late 2024 and will likely slow further in 2025.

The second graph shows the participation rate for "prime age" workers (25 to 54 years old). The 25 to 54 participation rate was at 83.5% in November 2024 Red), above the pre-pandemic level of 83.0%.  This suggests all of the prime age workers have returned to the labor force.

Since almost all of the workers impacted by the pandemic have returned to the labor force, demographics will be the key driver of the participation rate in 2025 (barring some unseen event).  Demographics will be pushing the participation rate down over the next decade, so, my guess is the participation rate will decline to around 62.2% in December 2025.

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 12/31/2024 09:52:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Up 3.6% year-over-year in October

Excerpt:

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3-month average of August, September and October closing prices). October closing prices include some contracts signed in June, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The MoM increase in the seasonally adjusted (SA) Case-Shiller National Index was at 0.35% (a 4.2% annual rate), This was the 21st consecutive MoM increase in the seasonally adjusted index.

On a seasonally adjusted basis, prices increased month-to-month in 18 of the 20 Case-Shiller cities (prices declined in Cleveland and Tampa seasonally adjusted). San Francisco has fallen 6.4% from the recent peak, Phoenix is down 3.0% from the peak, and Denver down 2.0%.

There is much more in the article.

by Calculated Risk on 12/31/2024 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3-month average of August, September and October closing prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P S&P CoreLogic Case-Shiller Index Records 3.6% Annual Gain in October 2024

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 3.6% annual return for October, down from a 3.9% annual gain in the previous month. The 10-City Composite saw an annual increase of 4.8%, down from a 5.2% annual increase in the previous month. The 20-City Composite posted a year-over-year increase of 4.2%, dropping from a 4.6% increase in the previous month. New York again reported the highest annual gain among the 20 cities with a 7.3% increase in October, followed by Chicago and Las Vegas with annual increases of 6.2% and 5.9%, respectively. Tampa posted the smallest year-over-year growth with 0.4%
...
The pre-seasonally adjusted U.S. National Index, 20-City Composite, and 10-City Composite upward trends continued to reverse in October, with a -0.2% drop for the national index, and the 20-City and 10-City Composites saw -0.2% and -0.1% returns for this month, respectively.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.3%, while both the 20-City and 10-City Composite reported monthly rises of 0.3%.

“New York once again reigns supreme as the fastest-growing housing market with annual returns over double the national average,” says Brian D. Luke, CFA, Head of Commodities, Real & Digital Assets. “Two markets have dominated the top ranks with New York leading all markets the past six months and San Diego the six months prior. New York is the only market sitting at all-time highs and one of just three markets with gains on the month. Accounting for seasonal adjustments shows a broader rally across the country.

“Our National Index hit its 17th consecutive all-time high, and only two markets – Tampa and Cleveland – fell during the past month,” Luke continued. “The annual returns continue to post positive inflation-adjusted returns but are falling well short of the annualized gains experienced this decade. Markets in Florida and Arizona are rising, but not keeping up with inflation, and are well off the over 10% gains annually from 2020 to present. This has allowed other markets to catch up.

“With the latest data covering the period prior to the election, our national index has shown continued improvement,” Luke continued. “Removing the political uncertainly risk has led to an equity market rally; it will be telling should the similar sentiment occur among homeowners.”
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index was up 0.3% in October (SA).  The Composite 20 index was up 0.3% (SA) in October.

The National index was up 0.3% (SA) in October.

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA was up 4.8% year-over-year.  The Composite 20 SA was up 4.2% year-over-year.

The National index SA was up 3.6% year-over-year.

Annual price changes were close to expectations.  I'll have more later.

by Calculated Risk on 12/30/2024 08:21:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start New Week With Some Hope

Last week wasn't great for mortgage rates. They moved higher on each of the 5 days. Moreover, there was a distinct lack of logical motivation from the economic data. In fact, on a few occasions, the data argued for lower rates only for things to move in the other direction by the end of the day.

The new week is off to a different start. ...

Traders are already assuming the Fed will pencil in a slower pace of rate cuts than they did in the September meeting. Some of the recent rise in rates reflects those trades. [30 year fixed 6.72%]
emphasis added

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

• Also at 9:00 AM ET: S&P/Case-Shiller House Price Index for October. The consensus is for an 4.1% year-over-year increase in the Composite 20 index for October.

by Calculated Risk on 12/30/2024 06:19:00 PM

From STR: U.S. hotel results for week ending 21 December

The U.S. hotel industry reported positive year-over-year performance comparisons, according to CoStar’s latest data through 21 December. ...

Growth was elevated due to the Hannukah calendar shift as well as the compressed business travel period between Thanksgiving and Christmas. As expected, actual levels were significantly lower than the prior week because of the seasonal slowdown.

15-21 December 2024 (percentage change from comparable week in 2023):

• Occupancy: 48.9% (+11.4%)
• Average daily rate (ADR): US$135.79 (+2.7%)
• Revenue per available room (RevPAR): US$66.36 (+14.3%)
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 2024, blue is the median, and dashed light blue is for 2023.  Dashed purple is for 2018, the record year for hotel occupancy. 

The 4-week average of the occupancy rate is above both last year and the median rate for the period 2000 through 2023 (Blue) - and will likely finish mostly unchanged year-over-year.

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

The 4-week average will decline seasonally through the holidays.    This is a solid finish for 2024!

by Calculated Risk on 12/30/2024 03:36:00 PM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

5) Inflation: Core PCE was up 2.8% YoY through November. This was down from a peak of 5.6% in early 2022.  The FOMC is forecasting the YoY change in core PCE will be in the 2.5% to 2.7% range in Q4 2025. Will the core inflation rate decrease further in 2025, and what will the YoY core inflation rate be in December 2025?

Although there are different measures for inflation, they all show inflation above the Fed's 2% inflation target on a year-over-year basis.

Note:  I follow several measures of inflation, including median CPI and trimmed-mean CPI from the Cleveland Fed.  Also core PCE prices (monthly from the BEA) and core CPI (from the BLS).

Click on graph for larger image.

On a year-over-year basis, the median CPI rose 3.9%, the trimmed-mean CPI rose 3.2%, and the CPI less food and energy rose 3.3%. 

Core PCE is for October was up 2.8% YoY.

The Fed is projecting core PCE inflation will decrease to 2.5% to 2.7% by Q4 2025. 

However, over the last 6 months, inflation is already at or lower than the Fed's Q4 target (annualized):

PCE Price Index: 2.1% 
Core PCE Prices: 2.5%

The good news is we should expect a further decline in housing inflation (asking rents have been flat for 2 years, and it takes time for the previous rent increases to filter through to renewals).  And inflation was fairly high in Q1 last year - so it is likely YoY measures of inflation will decline further in Q1.

In general, I'm ignoring policy changes - those will mostly impact the economy in 2026 since it takes time to enact new policies and for the impact to occur.  However, tariffs could be implemented quickly and depending on the policy this could push up the inflation rate.

From Goldman Sachs economists today:

"By the end of 2025, we expect the underlying trend to fall to 2.1%, but we expect a one-time tariff boost to raise core PCE inflation to 2.4%."

My guess is core PCE inflation (year-over-year) will decrease in 2025 (from the current 2.8%) but still be above the Fed's 2% target by Q4 2025.  

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 12/30/2024 12:38:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in November and a Look Ahead to December Sales

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in November.

The big story for November was that existing home sales increased year-over-year (YoY) for the second time since July 2021 (October was the first). However, sales in November, at 4.15 million on a seasonally adjusted annual rate basis (SAAR) were still historically low. Sales averaged about 4.5 million SAAR in November 2017, 2018, and 2019. So, sales were still about 23% below pre-pandemic levels.
...
Here is a look at months-of-supply using NSA sales. Note the regional differences with more months-of-supply in the South, especially in Florida and Texas (although November statistics in Florida were likely still impacted by Hurricane Milton).

Miami is off the charts!
...
More local data coming in January for activity in December!

There is much more in the article.

by Calculated Risk on 12/30/2024 10:00:00 AM

From the NAR: Pending Home Sales Moved Up 2.2% in November, Fourth Straight Month of Increases

Pending home sales gained 2.2% in November – the fourth consecutive month of increases and the highest level since February 2023 – according to the National Association of REALTORS®. The Midwest, South and West experienced month-over-month gains in transactions, while the Northeast decreased. Year-over-year, contract signings increased in all four U.S. regions, with the West leading the pack.

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – advanced 2.2% to 79.0 in November. Year-over-year, pending transactions improved 6.9%. An index of 100 is equal to the level of contract activity in 2001.

“Consumers appeared to have recalibrated expectations regarding mortgage rates and are taking advantage of more available inventory,” said NAR Chief Economist Lawrence Yun. “Mortgage rates have averaged above 6% for the past 24 months. Buyers are no longer waiting for or expecting mortgage rates to fall substantially. Furthermore, buyers are in a better position to negotiate as the market shifts away from a seller’s market.”
...
The Northeast PHSI fell 1.3% from last month to 67.8, up 5.6% from November 2023. The Midwest index increased 0.4% to 78.1 in November, up 1.6% from the previous year.

The South PHSI improved 5.2% to 94.5 in November, up 8.5% from a year ago. The West index rose by 0.5% from the prior month to 64.3, up 11.8% from November 2023.
emphasis added

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in December and January.

by Calculated Risk on 12/30/2024 08:11:00 AM

Altos reports that active single-family inventory was down 2.5% week-over-week.

Inventory will continue to decline seasonally until early next year and probably bottom in late January or February.

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2024.  The black line is for 2019.  

Inventory was up 26.8% compared to the same week in 2023 (last week it was up 26.3%), and down 16.8% compared to the same week in 2019 (last week it was down 16.9%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed significantly!

This second inventory graph is courtesy of Altos Research.

As of Dec 27th, inventory was at 651 thousand (7-day average), compared to 667 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 12/29/2024 07:18:00 PM

Weekend:
• Schedule for Week of December 29, 2024

Monday:
• At 9:45 AM, Chicago Purchasing Managers Index for December.

• At 10:00 AM, Pending Home Sales Index for November. The consensus is for a 0.7% increase in the index.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for December. This is the last of regional manufacturing surveys for December.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 and DOW futures are down slightly (fair value).

Oil prices were up over the last week with WTI futures at $70.43 per barrel and Brent at $73.80 per barrel. A year ago, WTI was at $72, and Brent was at $78 - so WTI oil prices are down slighty year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $2.98 per gallon. A year ago, prices were at $3.11 per gallon, so gasoline prices are down $0.13 year-over-year.

by Calculated Risk on 12/29/2024 10:11:00 AM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

6) Monetary Policy: The FOMC cut the federal funds rate four times in 2024 from "5-1/4 to 5-1/2 percent" at the beginning of 2024, to "4-1/4 to 4-1/2" at the end of the year. Most FOMC participants expect around two 25 bp rate cuts in 2025. What will the Fed Funds rate be in December 2025?

As of December, looking at the "dot plot", the FOMC participants see the following number of rate cuts in 2025:

25 bp Rate Cuts	FOMC Members 2025
No Change	1
One Rate Cut	3
Two Rate Cuts	10
Three Rate Cuts	3
Four Rate Cuts	1
More than Four	1

The main view of the FOMC is for two rate cuts in 2025.

Goldman Sachs economists still think there will be 3 rate cuts in 2025:

"The bond market took the meeting as hawkish and is now pricing just 32bp of cuts in 2025, down from 50bp yesterday, and broader financial conditions tightened substantially. We left our more dovish forecast of three more cuts in March, June, and September 2025 unchanged, though we acknowledge that better inflation news or worse employment news will be needed for a March cut."

A key question: Is current policy restrictive (as Fed Chair Powell has said)?  With core PCE inflation at 2.8% year-over-year in November and the "neutral rate" at 2%+ would suggest a Fed Funds Rate at around 4.75% to 5.0% (Of course, estimates of the neutral rate vary widely).  

Currently the target Fed Funds rate range is '4-1/4 to 4-1/2' percent.  And the FOMC projections show core PCE inflation only declining to 2.5% to 2.7% by the end of 2025 (Q4-over-Q4).

However, the FOMC believes inflation will come down, partially because of an expected decline in housing inflation.   Asking rents have been flat for almost two years, and measures of rent (housing / shelter) are slowly declining.

If we look at recent readings over the last 6 months annualized (through November):

PCE Price Index: 2.1% 

Core PCE Prices: 2.5%

Core minus Housing: 2.3%

Also, in Q1 2024, PCE inflation was very high.  There might be some residual seasonality in Q1, however, it seems likely inflation will be lower in Q1 2025, lowering the YoY measures.

The next FOMC meeting ends on January 29th, and the FOMC will likely hold rates steady at that meeting.   The FOMC might cut rates in March if inflation readings for January are favorable.

With inflation still above target over the last 6 months, my guess is there will be 1 or 2 rate cuts in 2025.

I also expect the FOMC to slow balance sheet runoff in 2025. 

FOMC policy will depend on what happens with inflation and employment in 2025.  

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 12/28/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• New Home Sales Increase to 664,000 Annual Rate in November

• FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

• Lawler: New Census Population Estimates Show Massively Higher Population Growth

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

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

by Calculated Risk on 12/28/2024 08:11:00 AM

Happy New Year! Wishing you all the best in 2025.

The key reports this week are the October Case-Shiller house price indexes, the December ISM manufacturing survey and December vehicle sales.

----- Monday, December 30th -----
9:45 AM: Chicago Purchasing Managers Index for December.

10:00 AM: Pending Home Sales Index for November. The consensus is for a 0.7% increase in the index.

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

----- Tuesday, December 31st -----
9:00 AM: FHFA House Price Index for October. This was originally a GSE only repeat sales, however there is also an expanded index. 

9:00 AM ET: S&P/Case-Shiller House Price Index for October.

This graph shows 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 an 4.1% year-over-year increase in the Composite 20 index for October.

----- Wednesday, January 1st -----
The NYSE and the NASDAQ will be closed in observance of the New Year’s Day holiday

----- Thursday, January 2nd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release two weeks of results for the mortgage purchase applications index.

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for an increase to 223 thousand from 219 thousand last week.

10:00 AM: Construction Spending for November. The consensus is for a 0.3% increase in construction spending.

----- Friday, January 3rd -----
10:00 AM: ISM Manufacturing Index for December. The consensus is for the ISM to be at 48.3, down from 48.4 in November.

All day: Light vehicle sales for December.

The Wards forecast is for 16.7 million SAAR in December, up from the BEA estimate of 16.50 million SAAR in November (Seasonally Adjusted Annual Rate).

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

by Calculated Risk on 12/27/2024 07:11:00 PM

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

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week🚩	451	438	≤3501
1my goals to stop weekly posts. 🚩 Increasing number weekly for Deaths. ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported.

Although weekly deaths met the original goal to stop posting, I'm continuing to post now that deaths are above the goal again - and at a minimum, I'll continue to post through the Winter.  

Weekly deaths had been declining but increased slightly this week (no surprise given the sharp increase in wastewater testing results).  Weekly deaths are still above the low of 313 in early June 2024.

And here is a graph I'm following concerning COVID in wastewater as of December 26th:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater is "HIGH" according to the CDC - and more than double the lows of last May - and increasing sharply.  Something to watch.

by Calculated Risk on 12/27/2024 11:21:00 AM

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q3 2024 (just released).
...
Here is some data showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q3 2024.

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.1% (now at 55.2%), and the percent under 5% peaked at 85.6% (now at 73.3%). These low existing mortgage rates makes it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply. This is a key reason existing home inventory levels are so low.

There is much more in the article.

by Calculated Risk on 12/27/2024 10:40:00 AM

From Goldman:

We lowered our Q4 GDP tracking estimate by 0.1pp to +2.3% (quarter-over-quarter annualized). Our Q4 domestic final sales forecast stands at +2.3% (quarter-over-quarter annualized). [Dec 27th estimate]
emphasis added

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the fourth quarter of 2024 is 3.1 percent on December 24, unchanged from December 20 after rounding. After both the advance durable manufacturing report and the new home sales release from the US Census Bureau, the nowcast of fourth-quarter real gross private domestic investment growth increased from 1.2 percent to 1.3 percent. [Dec 24th estimate]

by Calculated Risk on 12/27/2024 08:11:00 AM

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I posted thoughts on those in the newsletter (others like GDP and employment will be on this blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

7) Wage Growth: Wage growth was solid in 2024, up 4.0% year-over-year as of November. How much will wages increase in 2025?

The most followed wage indicator is the “Average Hourly Earnings” from the Current Employment Statistics (CES) (aka "Establishment") monthly employment report.

Click on graph for larger image.

The graph shows the nominal year-over-year change in "Average Hourly Earnings" for all private employees.  There was a huge increase at the beginning of the pandemic as lower paid employees were let go, and then the pandemic related spike reversed a year later.

Real wage growth has trended down after peaking at 5.9% YoY in March 2022 and was at 4.0% YoY in November 2024. Although wage growth was above expectations in November, the trend is clearly down.

There are two quarterly sources for earnings data: 1) “Hourly Compensation,” from the BLS’s Productivity and Costs; and 2) the Employment Cost Index which includes wage/salary and benefit compensation. All three data series are different, and most of the focus recently has been the CES series (used in the graph above).

The second graph is from the Atlanta Fed Wage Tracker.   This measure is the year-over-year change in nominal wages for individuals.

By following wage changes for individuals, this removes the demographic composition effects (older workers who are retiring tend to be higher paid, and younger workers just entering the workforce tend to be lower paid).

The Atlanta Fed Wage tracker showed nominal wage growth increased sharply in 2021 and for most of 2022.   In November 2024, the smoothed 3-month average wage growth was at 4.3% year-over-year, down from a peak of 6.7% in July 2022.

Clearly wage growth is slowing and I expect to see some further decreases in both the Average hourly earnings from the CES, and in the Atlanta Fed Wage Tracker.  My sense is nominal wages will increase close to mid-to-high 3% range YoY in 2025 according to the CES.  Update 1/1/2025: It is possible that wage growth will increase with a falling participation rate and slower population growth. 

Here are the Ten Economic Questions for 2025 and a few predictions:

• Question #1 for 2025: How much will the economy grow in 2025? Will there be a recession in 2025?

• Question #2 for 2025: How much will job growth slow in 2025? Or will the economy lose jobs?

• Question #3 for 2025: What will the unemployment rate be in December 2025?

• Question #4 for 2025: What will the participation rate be in December 2025?

• Question #5 for 2025: What will the YoY core inflation rate be in December 2025?

• Question #6 for 2025: What will the Fed Funds rate be in December 2025?

• Question #7 for 2025: How much will wages increase in 2025?

• Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

• Question #9 for 2025: What will happen with house prices in 2025?

• Question #10 for 2025: Will inventory increase further in 2025?

by Calculated Risk on 12/26/2024 05:02:00 PM

Today, in the CalculatedRisk Real Estate Newsletter: Question #8 for 2025: How much will Residential investment change in 2025? How about housing starts and new home sales in 2025?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

8) Residential Investment: Residential investment (RI) was slightly positive through the first three quarters of 2024. Through November, starts were down 4.3% year-to-date compared to the same period in 2023 (due to a sharp decline in multi-family starts). New home sales were up 2.1% year-to-date through October. Note: RI is mostly investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales. How much will RI change in 2025? How about housing starts and new home sales in 2025?
...
Here is a table showing single and multi-family housing starts and new home sales since 2000. Note that single family starts, and new home sales declined sharply for several years following the housing bubble. The dynamics in this cycle are very different, and there will not be significant distressed sales in this cycle. Also new home sales were not as elevated prior to the downturn, so the decline wasn’t as sharp.

The decline in single-family starts and new home sales was not as severe or persistent as during the housing bust. Multi-family starts have been down significantly for two straight years.

There is much more in the post.

by Calculated Risk on 12/26/2024 09:39:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: Question #9 for 2025: What will happen with house prices in 2025?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts and predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be up 3% to 4% in 2024. What will happen with house prices in 2025?
...
The following graph shows the year-over-year change through September 2024, in the seasonally adjusted Case-Shiller Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000). The Case-Shiller Home Price Indices for "September" is a 3-month average of July, August and September closing prices. September closing prices include some contracts signed in May, so there is a significant lag to this data.

The Composite 10 SA was up 5.2% year-over-year in September. The Composite 20 SA was up 4.6% year-over-year. The National index SA was up 3.9% year-over-year. All were at new all-time highs in September.
...
Supply and demand are the keys for house prices; however, national house prices will mask some regional differences. We are seeing significant regional differences in supply at the end of 2024, with inventory increasing sharply in Florida and parts of Texas (and some other areas).

There is much more in the post.

by Calculated Risk on 12/26/2024 08:30:00 AM

The DOL reported:

In the week ending December 21, the advance figure for seasonally adjusted initial claims was 219,000, a decrease of 1,000 from the previous week's unrevised level of 220,000. The 4-week moving average was 226,500, an increase of 1,000 from the previous week's unrevised average of 225,500.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 226,500.

The previous week was unrevised.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 12/25/2024 07:23:00 PM

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

Mortgage rates as of Monday (a little lower on Tuesday).

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. Initial claims were at 220 thousand last week.

by Calculated Risk on 12/25/2024 08:11:00 AM

Here is a High Sierra webcam (it is snowing!)

And the beach in Newport.

Best Wishes to All!

by Calculated Risk on 12/24/2024 04:01:00 PM

From housing economist Tom Lawler:

Since September 17th the Federal Reserve has lowered its federal funds rate range by 100 basis points. Below is a table showing Treasury and MBS rates since September 17th.

Click on graph for larger image.

Ho, Ho, Ho!!!! Happy Holidays!!!!

10-Year T1PS Yield

The chart below shows the monthly average 10-Year TIPS yield from December 2003 to December 2007 and then from January 2023 to December 2024 (December 2024 is the average to date). It excludes the financial crisis and the subsequent decade as well as the 2020-2022 Covid period.

From 2003 to 2007 the 10-year TIPS yield averaged 2.06%, about the same as the average so far in December 2024.

by Calculated Risk on 12/24/2024 12:46:00 PM

Today, in the CalculatedRisk Real Estate Newsletter: Lawler: New Census Population Estimates Show Massively Higher Population Growth

Excerpt:

From housing economist Tom Lawler: New Census Population Estimates Incorporate Revised Methodology for Estimating Net International Migration, Show Massively Higher Population Growth

Last week Census released its “Vintage 2024” estimates of the US resident population, and the new estimates show substantially faster population growth over the past few years than those shown in the “Vintage 2023” estimates. The reason, not surprisingly, is that Census updated its methodology to include estimates of what it refers to as “humanitarian” migrants, including border patrol releases and paroles. As many probably remember, last year the CBO issued a report suggesting that border patrol/other data indicated that net international migration over the past few years had been massively higher than official Census estimates had suggested. For more details on Census’ updated NIM methodology, see Census Bureau Improves Methodology to Better Estimate Increase in Net International Migration

Below are some tables comparing the Vintage 2024 population estimates with the Vintage 2023 population estimates.

Note: Each population “Vintage” includes projections of the resident population for the subsequent year. Thus, for Vintage 2023 the 2024 numbers are projections, and for Vintage 2024 the 2025 numbers are projections.

As this table shows, estimated population growth from July 1, 2021 to July 1, 2024 from Vintage 2024 is an eye-popping 3,386,610 higher than the Vintage 2023 estimate. Virtually all of this difference reflects higher estimates of net international migration in the Vintage 2024 estimates.

by Calculated Risk on 12/24/2024 09:16:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: Question #10 for 2025: Will inventory increase further in 2025?

Excerpt:

Earlier I posted some questions on my blog for next year: Ten Economic Questions for 2025. Some of these questions concern real estate (inventory, house prices, housing starts, new home sales), and I’ll post thoughts on those in this newsletter (others like GDP and employment will be on my blog).

I'm adding some thoughts, and maybe some predictions for each question.

Here is a review of the Ten Economic Questions for 2024.

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022. Since then, inventory has increased but is still below pre-pandemic levels. Will inventory increase further in 2025?

First, a brief history. Here are a few times when watching existing home inventory helped my analysis.

Starting in January 2005, I was very bearish on housing, but I wasn’t sure when the market would turn. Speculative bubbles can go on and on. However, the increase in existing home inventory in late 2005 (see red arrow on graph below) helped me call the top for house prices in 2006.

Several years later, in early 2012, when many people were still bearish on housing, the plunge in inventory in 2011 (blue arrow on graph below) helped me call the bottom for house prices in early 2012 (see The Housing Bottom is Here).

by Calculated Risk on 12/23/2024 07:41:00 PM

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

Tuesday:
• At 10:00 AM ET, Richmond Fed Survey of Manufacturing Activity for December.

The NYSE and the NASDAQ will close early at 1:00 PM ET.

by Calculated Risk on 12/23/2024 04:00:00 PM

From the MBA: Share of Mortgage Loans in Forbearance Increases to 0.50% in November

The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance increased to 0.50% as of November 30, 2024. According to MBA’s estimate, 250,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 8.5 million borrowers since March 2020.

The share of Fannie Mae and Freddie Mac loans in forbearance increased 1 basis point to 0.21% in November 2024. Ginnie Mae loans in forbearance increased by 5 basis points to 1.11%, and the forbearance share for portfolio loans and private-label securities (PLS) decreased 1 basis point to 0.42%.

“The overall mortgage forbearance rate increased three basis points in November and has now risen for six consecutive months,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “By investor type, Ginnie Mae loans are showing the greatest variance, with an increase of 72 basis points over the six-month period. That is compared to 11 basis points for Fannie Mae and Freddie Mac Loans, and portfolio and PLS loans, respectively.”

Added Walsh, “There is some weakening in performance of servicing portfolios and loan workouts compared to one year ago. In the wake of natural disasters and slowing in the labor market, borrowers with government loans tend to be impacted more than conventional borrowers.”
emphasis added

At the end of November, there were about 250,000 homeowners in forbearance plans.

by Calculated Risk on 12/23/2024 01:11:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12-month average.

Click on graph for larger image.

On a rolling 12-month basis, inbound traffic increased 1.5% in November compared to the rolling 12 months ending in October.   Outbound traffic increased 0.8% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday and then decline sharply and bottom in the Winter depending on the timing of the Chinese New Year.  

Imports were up 20% YoY in November, and exports were up 10% YoY.    

This was a very strong July through November period for imports as retailers prepared for holiday shopping - and likely to stockpile goods prior to the increase in tariffs. 

by Calculated Risk on 12/23/2024 10:49:00 AM

Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Increase to 664,000 Annual Rate in November

Brief excerpt:

The Census Bureau reported New Home Sales in November were at a seasonally adjusted annual rate (SAAR) of 664 thousand. The previous three months were revised up, combined.
...
The next graph shows new home sales for 2023 and 2024 by month (Seasonally Adjusted Annual Rate). Sales in November 2024 were up 8.7% from November 2023.

New home sales, seasonally adjusted, have increased year-over-year in 18 of the last 20 months. Note that sales the previous month - October 2024 - were impacted by the hurricanes.

There is much more in the article.

by Calculated Risk on 12/23/2024 10:00:00 AM

The Census Bureau reports New Home Sales in November were at a seasonally adjusted annual rate (SAAR) of 664 thousand.

The previous three months were revised up, combined.

Sales of new single-family houses in November 2024 were at a seasonally adjusted annual rate of 664,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 5.9 percent above the revised October rate of 627,000 and is 8.7 percent above the November 2023 estimate of 611,000.
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

New home sales were below pre-pandemic levels.

The second graph shows New Home Months of Supply.

The months of supply decreased in November to 8.9 months from 9.2 months in October.

The all-time record high was 12.2 months of supply in January 2009. The all-time record low was 3.3 months in August 2020.

This is well above the top of the normal range (about 4 to 6 months of supply is normal).

"The seasonally-adjusted estimate of new houses for sale at the end of November was 490,000. This represents a supply of 8.9 months at the current sales rate."

Sales were above expectations of 650 thousand SAAR, and sales for the three previous months were revised up, combined. I'll have more later today.

by Calculated Risk on 12/23/2024 08:11:00 AM

Altos reports that active single-family inventory was down 2.2% week-over-week.  Inventory is now 9.7% below the peak for the year (9 weeks ago).

Inventory will continue to decline seasonally until early next year and probably bottom in January or February.

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Click on graph for larger image.

The red line is for 2024.  The black line is for 2019.  

Inventory was up 26.3% compared to the same week in 2023 (last week it was up 26.6%), and down 16.9% compared to the same week in 2019 (last week it was down 17.0%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed significantly!

This second inventory graph is courtesy of Altos Research.

As of Dec 20th, inventory was at 667 thousand (7-day average), compared to 682 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 12/22/2024 06:21:00 PM

Weekend:
• Schedule for Week of December 22, 2024

• Ten Economic Questions for 2025

Monday:
• At 8:30 AM ET,Chicago Fed National Activity Index for November. This is a composite index of other data.

• Also at 8:30 AM, Durable Goods Orders for November.  The consensus is for a 0.4% decrease.

• At 10:00 AM, New Home Sales for November from the Census Bureau. The consensus is for 650 thousand SAAR, up from 610 thousand in October.  Sales in October were impacted by the hurricanes, with the South region down 27.7% year-over-year.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 futures are up 23 and DOW futures are up 147 (fair value).

Oil prices were up over the last week with WTI futures at $69.46 per barrel and Brent at $72.94 per barrel. A year ago, WTI was at $73, and Brent was at $80 - so WTI oil prices are down about 5% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.03 per gallon. A year ago, prices were at $3.10 per gallon, so gasoline prices are down $0.07 year-over-year.

by Calculated Risk on 12/22/2024 10:07:00 AM

Here is a review of the Ten Economic Questions for 2024.

Below are my ten questions for 2025 (I've been doing this online every year for 20 years!).  These are just questions; I'll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework of how the U.S. economy will likely perform in 2025, and if there are surprises - like in 2020 with the pandemic - to adjust my thinking.

There is significant uncertainty as to fiscal and regulatory policy in 2025.  There were many promises made during the campaign that obviously will not happen (deport 20 million people, no taxes on tips, overtime or Social Security benefits, 200% tariffs, and on and on).  

We can assume the 2017 Tax Cuts and Jobs Act (TCJA) will be extended.  That larger tariffs will be imposed on some imports, and there will be some deregulation.  There is also the potential for significant policy mistakes, but for now I'm assuming any policy changes will not significantly impact the economy in 2025. 

 

1) Economic growth: Economic growth was probably close to 2.8% in 2024 (around 2.6% Q4-over-Q4).  The FOMC is expecting growth of 1.8% to 2.2% Q4-over-Q4 in 2025. How much will the economy grow in 2025?  Will there be a recession in 2025?

2) Employment: Through November 2024, the economy added 2.0 million jobs in 2024.   This is down from 3.0 million jobs added in 2023, 4.8 million in 2022, and 7.3 million in 2021 (2021 and 2022 were the two best years ever), but still a solid year for employment gains. How much will job growth slow in 2025?  Or will the economy lose jobs? 

3) Unemployment Rate: The unemployment rate was at 4.2% in November, up from 3.7% in November 2023.   Currently the FOMC is projecting the unemployment rate will increase to the 4.2% to 4.5% range in Q4 2025.  What will the unemployment rate be in December 2025?

4) Participation Rate: In November 2024, the overall participation rate was at 62.5%, down year-over-year from 62.8% in November 2023, and below the pre-pandemic level of 63.3% in February 2020.   Long term, the BLS is projecting the overall participation rate will decline to 61.2% by 2033 due to demographics.  What will the participation rate be in December 2025?

5) Inflation: Core PCE was up 2.8% YoY through November. This was down from a peak of 5.6% in early 2022.  The FOMC is forecasting the YoY change in core PCE will be in the 2.5% to 2.7% range in Q4 2025. Will the core inflation rate decrease further in 2025, and what will the YoY core inflation rate be in December 2025? 

6) Monetary Policy:  The FOMC cut the federal funds rate four times in 2024 from "5-1/4 to 5-1/2 percent" at the beginning of 2024, to "4-1/4 to 4-1/2" at the end of the year. Most FOMC participants expect around two 25 bp rate cuts in 2025.  What will the Fed Funds rate be in December 2025?

7) Wage Growth: Wage growth was solid in 2024, up 4.0% year-over-year as of November.  How much will wages increase in 2025?

8) Residential Investment: Residential investment (RI) was slightly positive through the first three quarters of 2024.  Through November, starts were down 4.3% year-to-date compared to the same period in 2023 (due to a sharp decline in multi-family starts). New home sales were up 2.1% year-to-date through October.  Note: RI is mostly investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales.  How much will RI change in 2025?  How about housing starts and new home sales in 2025?

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be up 3% to 4% in 2024.  What will happen with house prices in 2025?

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022.  Since then, inventory has increased but is still below pre-pandemic levels.  Will inventory increase further in 2025?