by Calculated Risk on 9/25/2020 06:48:00 PM

The US is now mostly reporting over 700,000 tests per day. 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 907,482 test results reported over the last 24 hours.

There were 50,963 positive tests.

Over 20,000 Americans have died from COVID so far in September. 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 5.6% (red line is 7 day average).

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.

The second graph shows the 7 day average of positive tests reported.

The dashed line is the June low.

Note that there were very few tests available in March and April, and many cases were missed (the percent positive was very high - see first graph). By June, the percent positive had dropped below 5%.

If people stay vigilant, the number of cases might drop to the June low some time in October (that would still be a large number of new cases, but progress).

by Calculated Risk on 9/25/2020 04:43:00 PM

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

Click on graph for larger image.

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

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

The Wards forecast of 16.2 million SAAR, would be up 6.6% from August, and down 5.2% from September 2019.

This would put sales in 2020, through September, down about 18% compared to the same period in 2019.

by Calculated Risk on 9/25/2020 11:38:00 AM

From Merrill Lynch:

We expect 2Q GDP to be unrevised at -31.7% qoq saar in the third and final release. We continue to track 27% qoq saar for 3Q GDP. [Sept 25 estimate]
emphasis added

From Goldman Sachs:

The details of the durable goods report were broadly consistent with our expectations. We left our Q3 GDP tracking estimate unchanged at +35% (qoq ar). [Sept 25 estimate]

From the NY Fed Nowcasting Report

The New York Fed Staff Nowcast stands at 14.1% for 2020:Q3 and 5.0% for 2020:Q4. [Sept 25 estimate]

And from the Altanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2020 is 32.0 percent on September 25, unchanged from September 17 after rounding. [Sept 25 estimate]

It is important to note that GDP is reported at a seasonally adjusted annual rate (SAAR).  A 30% annualized increase in Q3 GDP, is about 6.8% QoQ, and would leave real GDP down about 4.2% from Q4 2019.

The following graph illustrates this decline.

Click on graph for larger image.

This graph shows the percent decline in real GDP from the previous peak (currently the previous peak was in Q4 2019).

This graph is through Q2 2020, and real GDP is currently off 10.2% from the previous peak.  For comparison, at the depth of the Great Recession, real GDP was down 4.0% from the previous peak.

The black arrow shows what a 30% annualized increase in real GDP would look like in Q3.

Even with a 30% annualized increase (about 6.8% QoQ), real GDP will be down about 4.2% from Q4 2019; a larger decline in real GDP than at the depth of the Great Recession.

by Calculated Risk on 9/25/2020 09:54:00 AM

From housing economist Tom Lawler: Serious Delinquency Rate on FHA-Insured SF Loans Up Again in August

While the FHA’s “official” monthly loan performance report for August is not yet available on its website, data from the FHA’s Early Warning System indicates that FHA’s Early Warning System indicate that the serious delinquency rate on FHA-insured single-family loans increased to above 11% in August, an all-time monthly high.

Delinquency rates in the EWS do not match those in the official report, but the two delinquency rates tend to move together over time.

Delinquency Rate, FHA-Insured SF Loans Official Report
	Total	30-day	60-day	SDQ
2/29/2020	10.85%	5.16%	1.65%	4.04%
3/31/2020	11.17%	5.59%	1.61%	3.97%
4/30/2020	15.52%	9.20%	2.28%	4.04%
5/31/2020	17.27%	6.37%	5.99%	4.91%
6/30/2020	17.41%	4.74%	3.71%	8.96%
7/31/2020	17.24%	4.15%	2.51%	10.58%
Early Warning System, Active Servicers
2/29/2020	10.63%	5.16%	1.66%	3.81%
3/31/2020	10.74%	5.36%	1.62%	3.76%
4/30/2020	15.32%	9.17%	2.27%	3.88%
5/31/2020	17.15%	6.37%	5.99%	4.80%
6/30/2020	17.17%	4.65%	3.70%	8.82%
7/31/2020	17.04%	4.05%	2.55%	10.44%
8/31/2020	17.43%	4.07%	2.20%	11.17%

The official Loan Performance Trends Report includes delinquency data for various subcategories, including (Fiscal) Year “Cohorts. Here are some SDQ data by Fiscal Year endorsement.

FHA SF Serious Delinquency Rate by Fiscal Year1 Cohort
	7/31/2020	2/29/2020	7/31/2019
All	10.58%	4.04%	3.78%
2015	11.65%	4.54%	4.07%
2016	11.31%	4.04%	3.49%
2017	11.79%	4.00%	3.15%
2018	13.14%	4.32%	2.49%
2019	12.13%	1.92%	0.42%
2020	5.09%	0.08%
1October of the previous to September of the current year

Click on graph for larger image.

What is striking about these data is that the years with both the largest increases in SDQ’s and the highest SDQ levels were the 2018 and 2019 “cohorts.” These two years were relatively risky books of business, with lower average credit scores compared to the previous 10 years and substantially higher (and never before seen) average debt-to-income ratios than in the previous 10 years.

The surging FHA serious delinquency rate obviously reflects the huge increase in the number of FHA borrowers adversely impacted by the pandemic’s effect on the economy, and most of these seriously delinquent borrowers are in a FHA loan forbearance program. Given this program, combined with the current moratorium on foreclosures, the surging SDQ does not augur any imminent increase in foreclosures.

It does, however, highlight that a sizable number of homeowners (and, presumably, potential homeowners) have been adversely impacted financially by enough to be unable to make their mortgage payments.

This observation, of course, leads one to ask: why have SF family home sales surged by so much this summer?

Obviously, record low mortgage rates have been a catalyst, but it appears as if there has also been a sizeable, pandemic-related shift in the demand for existing householders who have not been materially impacted financially from the pandemic (1) away from urban areas and into suburban (or even more remote) areas, and (2) away from renting in multifamily units and into single-family detached units There has also apparently been a huge increase in demand for second homes, especially but not solely in beach, mountain, and country “resort” areas.

This “discrete” shift in relative demand, combined with limited supply as fewer than normal households already in single-family homes have been moving and listing their property for sale, has already started to put major upward pressure on prices of single-family detached homes, and in some areas of the country have created almost “bubble-like” conditions.

And this discrete shift in demand has played a massively larger role in the surge in SF home sales than “demographics.”

by Calculated Risk on 9/25/2020 08:00:00 AM

Note: Both Black Knight and the MBA (Mortgage Bankers Association) are putting out weekly estimates of mortgages in forbearance.

This data is as of September 22nd.

From Forbearances Down 24% from Peak

The pace of improvement in the number of mortgages in active forbearance increased this week, as the number of plans fell 95K over the past seven days (-2.6%).

This marks five consecutive weeks of improvement and puts us 24% off the peak in late May – a decline of 1.17M plans since that point.

Click on graph for larger image.

As of September 22, 3.6M homeowers remain in COVID-19-related forbearance plans, or 6.8% of all active mortgages, down from 7% last week. Together, they represent $751 billion in unpaid principal.

Servicers continue to proactively assess September-scheduled forbearance expirations for extensions and removals. As of the 22nd, 1.1M forbearance plans are still set to expire this month, down from 1.7M just last week.
...
Over the past month, active forbearance volumes are now down by 9%, with 357k fewer active COVID-19 forbearance plans than at the same time in August. Of the 3.6M loans still in active forbearance, some 78% have had their terms extended at some point since March.

The ongoing COVID-19 pandemic continues to represent significant uncertainty for the weeks ahead. Black Knight will continue to monitor the situation and report our findings on this blog.
emphasis added

by Calculated Risk on 9/24/2020 06:54:00 PM

The US is now mostly reporting over 700,000 tests per day. 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 887,884 test results reported over the last 24 hours.

There were 44,315 positive tests.

Over 19,000 Americans have died from COVID so far in September. 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 5.0% (red line is 7 day average).

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.

The second graph shows the 7 day average of positive tests reported.

The dashed line is the June low.

Note that there were very few tests available in March and April, and many cases were missed (the percent positive was very high - see first graph). By June, the percent positive had dropped below 5%.

If people stay vigilant, the number of cases might drop to the June low some time in October (that would still be a large number of new cases, but progress).

by Calculated Risk on 9/24/2020 04:33:00 PM

Note: Loans in forbearance are counted as delinquent in this survey, but those loans are not reported as delinquent to the credit bureaus.

From Black Knight: Early-Stage Delinquencies Improve Further, While Seriously Past-Due Loans Rise; Rate of Improvement Slows

• The divergence between early-stage delinquencies and seriously past-due mortgages continues to widen as fewer delinquent loans cured to current status in August

• Overall, the national delinquency rate fell just 0.03 basis points from July after declining a combined 0.85 basis points over the prior two months, a noticeable slowing in the rate of improvement

• The share of borrowers with a single missed payment had already fallen below pre-pandemic levels; in August, the sum of all early-stage delinquencies (those 30 and 60 days past due) fell 9%, dropping below that benchmark as well

• However, the improvement in early-stage delinquencies was offset by a 5% increase in serious delinquencies – those 90 or more days past due – which have now risen in each of the past five months

• August’s rise in serious delinquencies was the mildest of those five months, suggesting that they may be nearing their peak

• While there are nearly 2 million more seriously delinquent homeowners than at pre-pandemic levels, foreclosure activity remains muted due to active forbearance plans and foreclosure moratoriums
emphasis added

According to Black Knight's First Look report, the percent of loans delinquent decreased 0.5% in August compared to July, and increased 99% year-over-year.

The percent of loans in the foreclosure process decreased 1.4% in August and were down 27% over the last year.

Black Knight reported the U.S. mortgage delinquency rate (loans 30 or more days past due, but not in foreclosure) was 6.88% in August, down from 6.81% in July.

The percent of loans in the foreclosure process decreased slightly in August to 0.35% from 0.36% in July.

The number of delinquent properties, but not in foreclosure, is up 1,866,000 properties year-over-year, and the number of properties in the foreclosure process is down 66,000 properties year-over-year.

Black Knight: Percent Loans Delinquent and in Foreclosure Process
	August 2020	July 2020	August 2019	August 2018
Delinquent	6.88%	6.91%	3.45%	3.52%
In Foreclosure	0.35%	0.36%	0.48%	0.54%
Number of properties:
Number of properties that are delinquent, but not in foreclosure:	3,679,000	3,692,000	1,813,000	1,818,000
Number of properties in foreclosure pre-sale inventory:	187,000	190,000	253,000	280,000
Total Properties	3,867,000	3,881,000	2,066,000	2,099,000

by Calculated Risk on 9/24/2020 02:45:00 PM

From HotelNewsNow.com: STR: US hotel results for week ending 19 September

U.S. hotel occupancy was nearly flat from the previous week, according to the latest data from STR.

13-19 September 2020 (percentage change from comparable week in 2019):

• Occupancy: 48.6% (-31.9%)
• Average daily rate (ADR): US$95.84 (-28.9%)
• Revenue per available room (RevPAR): US$46.54 (-51.6%)
...
Demand rose slightly (+0.3%), and the highest occupancy markets were once again those housing displaced residents from Hurricane Laura and western wildfires, with California South/Central showing the highest level in the metric (74.7%). The Louisiana South (72.8%) and Louisiana North (72.3%) markets were also among the top five highest occupancy levels for the week.
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 2020, dash light blue is 2019, blue is the median, and black is for 2009 (the worst year since the Great Depression for hotels - before 2020).

There was some boost by Hurricane Laura and the western fires, but it seems unlikely business travel will pickup significantly in the Fall.

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

by Calculated Risk on 9/24/2020 12:03:00 PM

From the Kansas City Fed: Tenth District Manufacturing Activity Increased at a Slower Pace

The Federal Reserve Bank of Kansas City released the September Manufacturing Survey today. According to Chad Wilkerson, vice president and economist at the Federal Reserve Bank of Kansas City, the survey revealed that Tenth District manufacturing activity increased at a slower pace in September and remained lower than a year ago, while expectations for future activity were positive.

“Regional factory activity expanded again in September but was still below year-ago levels for the majority of firms,” said Wilkerson. “Firms’ expectations for future activity continued to be relatively optimistic, although they anticipated slightly lower wage and salary growth in the year ahead.”

The month-over-month composite index was 11 in September, slightly lower than 14 in August but higher than 3 in July ...The composite index is an average of the production, new orders, employment, supplier delivery time, and raw materials inventory indexes. Activity at non-durable and durable goods factories expanded at a similar pace. The increase in activity at food and beverage manufacturers was slower in September than in previous months, when activity bounced back more sharply. Most month-over-month indexes remained positive, indicating continued expansion. Production, shipments, new orders, and employment rose at a slower pace, while order backlog and supplier delivery time increased. The indexes for employee workweek and new orders for exports dipped slightly, and inventory indexes for materials and finished goods were negative.
emphasis added

This suggests activity has bottomed, but activity is still below a year ago.

by Calculated Risk on 9/24/2020 10:28:00 AM

New home sales for August were reported at 1,011,000 on a seasonally adjusted annual rate basis (SAAR). Sales for the previous three months were revised up significantly.

This was well above consensus expectations, and this was the highest sales rate since 2006. Clearly low mortgages rates, low existing home supply, and low sales in March and April (due to the pandemic) have led to a strong increase in sales.  Favorable demographics (something I wrote about many times over the last decade) and a surging stock market have probably helped new home sales too.

Earlier: New Home Sales increased to 1,011,000 Annual Rate in August.

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 43.2% year-over-year (YoY) in August.   Year-to-date (YTD) sales are up 14.9%.

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 (like right now) - and fewer starts if inventory is too high (not now).

Important: No one should get too excited about new home sales as a leading indicator for the economy.  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, however, I've also 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 obviously be very positive about this report.