by Calculated Risk on 8/26/2020 07:48:00 PM

The US is now mostly reporting over 700,000 tests per day (fewer recently). Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 675 thousand test results reported over the last 24 hours.

There were 43 thousand positive tests.

There have been over 26,000 COVID reported deaths in the first 26 days of August. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 6.4% (red line).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

by Calculated Risk on 8/26/2020 03:01:00 PM

The Case-Shiller house price indexes for June were released yesterday. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: June Case-Shiller Results and July Forecast: Housing Continues to Withstand Pandemic

The June Case-Shiller numbers show the housing market continues to withstand the pandemic-driven blows that have caused so many other facets of the economy to suffer. ...
...
Mortgage rates and for-sale inventory are each plumbing new lows, ratcheting up competition for the few homes on the market. That’s placed consistent upward pressure on home prices, a trend that has held through the summer. While recent data suggest headwinds such as the enduring spread of the coronavirus and uncertainty surrounding the next round of relief payments could jeopardize the path of the economic recovery, these concerns haven’t materialized in home prices to this point. It could be that the housing market will eventually suffer as these concerns linger, but it appears that low rates are here to stay for now, which should continue to send prices higher.

Annual growth in July as reported by Case-Shiller is expected to speed up slightly in the 10- and 20-city indices, and stay steady in the national index. S&P Dow Jones Indices is expected to release data for the July S&P CoreLogic Case-Shiller Indices on Tuesday, September 29.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 4.4% in July, up from 4.3% in June (table says 4.4% in June, but CS reported a 4.3% gain).

The Zillow forecast is for the 20-City index to be up 3.6% YoY in July from 3.5% in June, and for the 10-City index to increase to be up 2.9% YoY compared to 2.8% YoY in June.

by Calculated Risk on 8/26/2020 10:12:00 AM

As part of the new home sales report released yesterday, the Census Bureau reported the number of homes sold by price and the average and median prices.

From the Census Bureau: "The median sales price of new houses sold in July 2020 was $330,600. The average sales price was $391,300."

The following graph shows the median and average new home prices.

Click on graph for larger image.

During the housing bust, the builders had to build smaller and less expensive homes to compete with all the distressed sales.  When housing started to recovery - with limited finished lots in recovering areas - builders moved to higher price points to maximize profits.

The average price in July 2020 was $391,300, up 2.5% from June, and down 2.9% from the peak in 2017.  The median price was $330,600, down 1.9% from June, and down 3.9% from the peak in 2017.

The average and median house prices have mostly moved sideways since 2017 due to home builders offering more lower priced homes.

The second graph shows the percent of new homes sold by price.

Very few new homes sold were under $150K in April 2020.  This is down from 30% in 2002.  In general, the under $150K bracket is going away.   

The $400K+ bracket increased significantly since the housing recovery started, but has been holding steady recently - and declined over the last year.  A majority of new homes (about 62%) in the U.S., are in the $200K to $400K range.

by Calculated Risk on 8/26/2020 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 6.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 21, 2020.

... The Refinance Index decreased 10 percent from the previous week and was 34 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 0.4 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 33 percent higher than the same week one year ago.

“Mortgage rates were mixed last week, but the rates for 30-year fixed mortgages and 15-year fixed mortgages declined. Despite the lower rates, conventional refinance applications fell 11 percent and government refinance applications fell 6 percent, which pushed the total refinance index to its lowest weekly level since July,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The home purchase market remains a bright spot for the overall economy. Purchase applications were essentially unchanged but were 33 percent higher than a year ago – the 14th straight week of year-over-year gains. Mortgage rates at record lows and households looking for more space are driving this summer’s surge in demand.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($510,400 or less) decreased to 3.11 percent from 3.13 percent, with points increasing to 0.38 from 0.36 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.


The first graph shows the refinance index since 1990.

The refinance index has been very volatile recently depending on rates and liquidity.

But with record low rates, the index is up significantly from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is up 33% year-over-year.

Note: Red is a four-week average (blue is weekly).

by Calculated Risk on 8/25/2020 06:32:00 PM

The US is now mostly reporting over 700,000 tests per day (fewer recently). Based on the experience of other countries, the percent positive needs to be well under 5% to really push down new infections, so the US still needs to increase the number of tests per day significantly (or take actions to push down the number of new infections).

There were 634,461 test results reported over the last 24 hours.

There were 36,679 positive tests.

There have been 24,953 COVID reported deaths in the first 25 days of August. See the graph on US Daily Deaths here.

Click on graph for larger image.

This data is from the COVID Tracking Project.

The percent positive over the last 24 hours was 5.8% (red line).

For the status of contact tracing by state, check out testandtrace.com.

And check out COVID Exit Strategy to see how each state is doing.

by Calculated Risk on 8/25/2020 05:00:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in July was 3.12%, up from 2.48% in June. Freddie's rate is up from 0.61% in July 2019.

This is the highest serious delinquency rate since February 2013.

Freddie's serious delinquency rate peaked in February 2010 at 4.20%.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

Click on graph for larger image

Mortgages in forbearance are being counted as delinquent in this monthly report, but they will not be reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once they are employed.

Note: Fannie Mae will report for July soon.

by Calculated Risk on 8/25/2020 03:37:00 PM

From Wards: U.S. Light Vehicle Sales & Inventory Forecast, August 2020 (pay content)

Click on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for August (Red).

Sales have bounced back from the April low, but are still down sharply year-over-year.

The Wards forecast of 15.2 million SAAR, would be up 4.7% from July, and down 11% from August 2019.

This would put sales in 2020, through August, down about 20% compared to the same period in 2019.

by Calculated Risk on 8/25/2020 03:28:00 PM

Here is the post earlier on Case-Shiller: Case-Shiller: National House Price Index increased 4.3% year-over-year in June

It has been over fourteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index (SA), was reported as being 18.1% above the previous bubble peak. However, in real terms, the National index (SA) is still about 4% below the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 12% below the bubble peak.

The year-over-year growth in prices decreased slightly to 4.3% nationally.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be close to $289,000 today adjusted for inflation (45%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

The first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through June) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).



Real House Prices

The second graph shows the same two indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is back to August 2005 levels, and the Composite 20 index is back to November 2004.

In real terms, house prices are at 2004/2005 levels.

Note that inflation was negative for a few months earlier this year, and that boosted real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0). The price-to-rent ratio has been moving sideways recently.

On a price-to-rent basis, the Case-Shiller National index is back to March 2004 levels, and the Composite 20 index is back to November 2003 levels.

In real terms, prices are back to late 2004/2005 levels, and the price-to-rent ratio is back to late 2003, early 2004.

by Calculated Risk on 8/25/2020 12:03:00 PM

New home sales for July were reported at 901,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised up, combined.

This was well above consensus expectations, and this was the highest sales rate since 2007. Clearly low mortgages rates, and low sales in March and April (due to the pandemic) have led to a bounce back in sales in May, June and July.  Favorable demographics (something I wrote about many times over the last decade) and a surging stock market have probably helped new home sales too.

Note that sales are reported on a seasonally adjusted annual rate basis (SAAR).   Sales in July NSA were up 3 thousand from June, but this translates into an increase from 791,000 SAAR in June to 901,000 SAAR in July.

Earlier: New Home Sales increased to 901,000 Annual Rate in July.

Click on graph for larger image.

This graph shows new home sales for 2019 and 2020 by month (Seasonally Adjusted Annual Rate).

New home sales were up 36.3% year-over-year (YoY) in July.   Year-to-date (YTD) sales are up 8.2%.

And on inventory: since new home sales are reported when the contract is signed - even if the home hasn't been started - new home sales are not limited by inventory.   Inventory for new home sales is important in that it means there will be more housing starts if inventory is low - and fewer starts if inventory is too high (not now).

Important: No one should get too excited.  Many years ago, I wrote several articles about how new home sales and housing starts (especially single family starts) were some of the best leading indicators for the economy.   However, I've noted that there are times when this isn't true.   NOW is one of those times.

Currently the course of the economy will be determined by the course of the virus, and New Home Sales tell us nothing about the future of the pandemic.  Without the pandemic, I'd be very positive about this report.

by Calculated Risk on 8/25/2020 10:17:00 AM

The Census Bureau released an update today on 2020 Census Paid Temporary Workers

As of the July BLS employment report reference week, there were 50,404 decennial Census temporary workers. As of August  reference week there were 288,204 temp workers.

This means the August employment report will show an increase of 237,800 in temporary Census hiring under Federal employment.

Click on graph for larger image.

This is the 2020 Census Paid Temporary Workers report released today.

The temporary employment for the July and August reference weeks are circled in red.

Since these are temporary, and only happen every ten years with the decennial Census, it makes sense to adjust the headline monthly Current Employment Statistics (CES) by Census hiring to determine the underlying employment trend.

The correct adjustment method is to take the headline number and subtract the change in the number of Census 2020 temporary and intermittent workers. For more, see: How to Report the Monthly Employment Number excluding Temporary Census Hiring