by Calculated Risk on 6/29/2021 09:00:00 PM

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

• At 8:15 AM, The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 600,000 payroll jobs added in June, down from 978,000 lost in May.

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

• At 10:00 AM, Pending Home Sales Index for May. The consensus is for a 0.8% increase in the index.

by Calculated Risk on 6/29/2021 05:32:00 PM

The Case-Shiller house price indexes for April were released today. 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: April 2021 Case-Shiller Results & Forecast: No Sign of Slowing

Mortgage rates remain near historic lows, a demographic wave of households aging into prime homeownership years continues to swell, and despite showing some signs of bottoming, the number of available homes for sale remains historically small, particularly given the elevated demand for housing. Prices have skyrocketed as a result, and price growth continues to set new record highs. What’s more, despite sharply rising prices, demand for homes remains very strong. Bidding wars for the relatively few houses available remain common and homes are going under contract at an increasingly fast pace. Inventory upticks in recent weeks suggest that a respite from these red-hot market conditions may be starting to form. But a return to a balanced market remains a long way off, and there are few, if any, signs that home price appreciation will start to subside anytime soon.

Monthly and annual growth in May as reported by Case-Shiller is expected to accelerate from April and Mary 2020 in all three main indices. S&P Dow Jones Indices is expected to release data for the May S&P CoreLogic Case-Shiller Indices on Tuesday, July 27.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 16.2% in May, up from 14.6% in April.

The Zillow forecast is for the 20-City index to be up 16.5% YoY in April from 14.9% in April, and for the 10-City index to increase to be up 16.1% YoY compared to 14.4% YoY in April.

by Calculated Risk on 6/29/2021 03:36:00 PM

This data is from the CDC.

According to the CDC, on Vaccinations.

Total doses administered: 325,152,847, as of a week ago 319,223,844. Average doses last week: 0.85 million per day.

COVID Metrics
	Today	Yesterday	Week Ago	Goal
Percent over 18, One Dose	66.2%	66.1%	65.5%	≥70.0%1,2
Fully Vaccinated (millions)	154.2	153.8	150.4	≥1601
New Cases per Day3,4🚩	11,707	11,817	11,344	≤5,0002
Hospitalized3	11,837	11,287	12,633	≤3,0002
Deaths per Day3,4🚩	286	312	284	≤502
1 America's Goal by July 4th, 2my goals to stop daily posts, 37 day average for Cases, Hospitalized, and Deaths 4Cases and Deaths updated Mon - Fri 🚩 Increasing week-over-week

KUDOS to the residents of the 16 states and D.C. that have already achieved the 70% goal: Vermont, Hawaii and Massachusetts are at 80%+, and Connecticut, Maine, New Jersey,  Rhode Island, Pennsylvania, New Mexico, Maryland, California, Washington, New Hampshire, New York, Illinois, Virginia and D.C. are all over 70%.

Next up are Delaware at 69.8%, Minnesota at 69.7%, Colorado at 69.6%, Oregon at 69.4%, Wisconsin at 65.2%, Nebraska at 65.1%, and Florida at 64.3%.

Click on graph for larger image.

This graph shows the daily (columns) and 7 day average (line) of positive tests reported.

This data is from the CDC.

by Calculated Risk on 6/29/2021 12:42:00 PM

Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases.  

In 2020, with the pandemic, inventory dropped to record lows, and prices really increased (record low mortgage rates and demographics were factors too).

I don't have a crystal ball, but watching inventory helps understand the housing market.

Click on graph for larger image.

This graph below shows existing home months-of-supply (inverted, from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through March 2021).

There is a clear relationship, and this is no surprise (but interesting to graph).  If months-of-supply is high, prices decline. If months-of-supply is very low (like now), prices rise quickly.

In April, the months-of-supply was at 2.4 months, and the Case-Shiller National Index (SA) increased 1.6% month-over-month (a month-over-month record).  The black arrow points to the April dot.

In the May existing home sales report released last week, the NAR reported months-of-supply increased to 2.5 month in May. There is a seasonal pattern to inventory, but this is still very low - and prices are increasing sharply.

by Calculated Risk on 6/29/2021 10:48:00 AM

Here is the post earlier on Case-Shiller: Case-Shiller: National House Price Index increased 14.6% year-over-year in April

It has been fifteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index (SA), was reported as being 35% above the previous bubble peak. However, in real terms, the National index (SA) is about 5% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 3% below the bubble peak.

The year-over-year growth in prices increased to 14.6% 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 over $301,000 today adjusted for inflation (50%).  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 April) 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 5% above the bubble peak, and the Composite 20 index is back to late-2005.

In real terms, house prices are close to previous peak  levels.

Note that inflation was negative for a few months last year, and that also 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 had been moving more sideways, but picked up significantly recently.

On a price-to-rent basis, the Case-Shiller National index is back to April 2005 levels, and the Composite 20 index is back to October 2004 levels.

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

by Calculated Risk on 6/29/2021 09:10:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for April ("April" is a 3 month average of February, March and April 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 Shows Annual Home Price Gains Surged to 14.6% In April

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 14.6% annual gain in April, up from 13.3% in the previous month. The 10-City Composite annual increase came in at 14.4%, up from 12.9% in the previous month. The 20-City Composite posted a 14.9% year-over-year gain, up from 13.4% in the previous month.

Phoenix, San Diego, and Seattle reported the highest year-over-year gains among the 20 cities in April. Phoenix led the way with a 22.3% year-over-year price increase, followed by San Diego with a 21.6% increase and Seattle with a 20.2% increase. All 20 cities reported higher price increases in the year ending April 2021 versus the year ending March 2021.
...
Before seasonal adjustment, the U.S. National Index posted a 2.1% month-over-month increase, while the 10-City and 20-City Composites both posted increases of 1.9% and 2.1% respectively in April.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.6%, and the 10-City and 20-City Composites both posted increases of 1.4% and 1.6% respectively. In April, all 20 cities reported increases before and after seasonal adjustments.

“Housing prices accelerated their surge in April 2021,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its eleventh consecutive month of accelerating prices with a 14.6% gain from year-ago levels, up from 13.3% in March. This acceleration is also reflected in the 10- and 20-City Composites (up 14.4% and 14.9%, respectively). The market’s strength is broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in April than they had gained in the 12 months ended in March.

“April’s performance was truly extraordinary. The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. Housing prices in all 20 cities rose; price gains in all 20 cities accelerated; price gains in all 20 cities were in the top quartile of historical performance. In 15 cities, price gains were in top decile. Five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – joined the National Composite in recording their all-time highest 12- month gains.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. April’s data continue to be consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question
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 is up 1.4% in April (SA) from March.

The Composite 20 index is up 1.6% (SA) in April.

The National index is 35% above the bubble peak (SA), and up 1.6% (SA) in April.  The National index is up 80% from the post-bubble low set in February 2012 (SA).

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

The Composite 10 SA is up 14.4% compared to April 2020.  The Composite 20 SA is up 14.9% year-over-year.

The National index SA is up 14.6% year-over-year.

Price increases were above expectations.  I'll have more later.

by Calculated Risk on 6/28/2021 08:22:00 PM

From Matthew Graham at Mortgage News Daily: MBS RECAP: Monday Giveth

Summertime weekend trading dynamics are sadly a source of motivation for bond markets--especially amid a lack of actionable data on a week that ends with the most actionable data. In that sense, whereas we found ourselves saying "Friday taketh away" at the end of last week, we can now say "Monday giveth." ... MBS kept pace with the Treasury gains quite nicely and 2.0 coupons are now at their best levels in 2 weeks. [30 year fixed 3.20%]
emphasis added

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for April. The consensus is for a 12.3% year-over-year increase in the Comp 20 index for April. (CR Note: Consensus seems low!)

• Also at 9:00 AM, FHFA House Price Index for April 2021. This was originally a GSE only repeat sales, however there is also an expanded index.

by Calculated Risk on 6/28/2021 04:00:00 PM

Note: This is as of June 20th.

From the MBA: Share of Mortgage Loans in Forbearance Slightly Decreases to 3.91%

The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 2 basis points from 3.93% of servicers’ portfolio volume in the prior week to 3.91% as of June 20, 2021. According to MBA’s estimate, 2 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 3 basis points to 2.02%. Ginnie Mae loans in forbearance decreased 2 basis points to 5.13%, while the forbearance share for portfolio loans and private-label securities (PLS) decreased 1 basis point to 7.97%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 2 basis points to 4.03%, and the percentage of loans in forbearance for depository servicers declined 2 basis points to 4.14%.

“The share of loans in forbearance declined for the 17th straight week, with small declines across almost every loan category,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “The rate of forbearance exits slowed – as has been typical in mid-month reports – but the pace of new forbearance requests remained at a very low level of 4 basis points.”

Added Fratantoni, “The steady improvement in the aggregate forbearance numbers is heartening, as it is evidence that improving economic conditions are allowing more homeowners to get back on their feet. However, we continue to closely monitor the number of forbearance re-entries, reflecting borrowers who exited forbearance but had to re-enter due to hardships. These re-entries accounted for 6.2 percent of loans in forbearance this week.”
emphasis added

Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  Most of the increase was in late March and early April 2020, and has trended down since then.

The MBA notes: "Total weekly forbearance requests as a percent of servicing portfolio volume (#) remained the same relative to the prior week at 0.04%".

Note: These deferral plans are very popular. Basically when the homeowner exits forbearance, they just go back to making their regular monthly payments, they are not charged interest on the missed payments, and the unpaid balanced is deferred until the end of the mortgage.

by Calculated Risk on 6/28/2021 03:38:00 PM

This data is from the CDC.

According to the CDC, on Vaccinations.

Total doses administered: 324,414,371, as of a week ago 318,576,441. Average daily doses last week: 0.83 million.

COVID Metrics
	Today	Yesterday	Week Ago	Goal
Percent over 18, One Dose	66.1%	66.0%	65.4%	≥70.0%1,2
Fully Vaccinated (millions)	153.8	153.0	150.0	≥1601
New Cases per Day3,4	10,332	11,025	11,111	≤5,0002
Hospitalized3	11,287	11,839	12,179	≤3,0002
Deaths per Day3,4🚩	295	305	270	≤502
1 America's Goal by July 4th, 2my goals to stop daily posts, 37 day average for Cases, Hospitalized, and Deaths 4Cases and Deaths updated Mon - Fri 🚩 Increasing week-over-week

KUDOS to the residents of the 16 states and D.C. that have already achieved the 70% goal: Vermont, Hawaii and Massachusetts are at 80%+, and Connecticut, Maine, New Jersey,  Rhode Island, Pennsylvania, New Mexico, Maryland, California, Washington, New Hampshire, New York, Illinois, Virginia and D.C. are all over 70%.

Next up are Delaware at 69.8%, Minnesota at 69.7%, Colorado at 69.5%, Oregon at 69.4%, Wisconsin at 65.2%, Nebraska at 65.0%, and Florida at 64.3%.

Click on graph for larger image.

This graph shows the daily (columns) and 7 day average (line) of positive tests reported.

This data is from the CDC.

by Calculated Risk on 6/28/2021 10:40:00 AM

Tracking existing home inventory will be very important this year.

Click on graph for larger image in graph gallery.

This inventory graph is courtesy of Altos Research.

As of June 25th, inventory was at 359 thousand (7 day average), compared to 677 thousand the same week a year ago.  That is a decline of 46.9%.

A week ago, inventory was at 353 thousand, and was down 48.8% YoY.  

Seasonally, inventory has bottomed.   Inventory was about 17.3% above the low in early April.

Mike Simonsen discusses this data regularly on Youtube.  Altos Research has also seen a significant pickup in price decreases, although still well below a normal rate for June.