by Calculated Risk on 11/24/2021 12:21:00 PM

Today, in the Real Estate Newsletter: New Home Sales: Record 109 thousand homes have not been started

Brief excerpt:

Sales, year to date in 2021, are 4.4% below sales in 2020, and new home sales in 2021 will finish solidly below sales in 2020 - since sales in 2020 finished strong.

This graph shows new home sales for 2020 and 2021 by month (Seasonally Adjusted Annual Rate).

The year-over-year comparisons were easy in the first half of 2021 - especially in March and April. However, sales will likely be down year-over-year for the remainder of 2021 - since the selling season was delayed in 2020.
...
The next graph shows the months of supply by stage of construction. “Months of supply” is inventory at each stage, divided by the sales rate.

The inventory of completed homes for sale was at 38 thousand in October, just above the record low of 33 thousand in March, April, May and July 2021. That is about 0.6 months of completed supply (red line). This is about half the normal level.

The inventory of new homes under construction is at 3.9 months (blue line) - well above the normal level. This elevated level of homes under construction is due to supply chain constraints.

And a record 109 thousand homes have not been started - about 1.8 months of supply (grey line) - almost double the normal level. Homebuilders are probably waiting to start some homes until they have a firmer grasp on prices.

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by Calculated Risk on 11/24/2021 10:17:00 AM

The BEA released the Personal Income and Outlays, October 2021 report:

Personal income increased $93.4 billion (0.5 percent) in October according to estimates released today by the Bureau of Economic Analysis. Disposable personal income (DPI) increased $63.0 billion (0.3 percent) and personal consumption expenditures (PCE) increased $214.3 billion (1.3 percent).

Real DPI decreased 0.3 percent in October and Real PCE increased 0.7 percent; goods increased 1.0 percent and services increased 0.5 percent. The PCE price index increased 0.6 percent. Excluding food and energy, the PCE price index increased 0.4 percent.
emphasis added

The October PCE price index increased 5.0 percent year-over-year and the October PCE price index, excluding food and energy, increased 4.1 percent year-over-year.

The following graph shows real Personal Consumption Expenditures (PCE) through October 2021 (2012 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Personal income and personal spending were above expectations, and the increase in the PCE price index was above expectations.

by Calculated Risk on 11/24/2021 10:08:00 AM

The Census Bureau reports New Home Sales in October were at a seasonally adjusted annual rate (SAAR) of 745 thousand.

The previous three months were revised down significantly.

Sales of new single‐family houses in October 2021 were at a seasonally adjusted annual rate of 745,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 0.4 percent above the revised September rate of 742,000, but is 23.1 percent below the October 2020 estimate of 969,000.
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 are now declining year-over-year since sales soared following the first few months of the pandemic.

The second graph shows New Home Months of Supply.

The months of supply increased in October to 6.3 months from 6.1 months in September.

The all-time record high was 12.1 months of supply in January 2009. The all-time record low was 3.5 months, most recently in October 2020.

This is slightly above 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 October was 389,000. This represents a supply of 6.3 months at the current sales rate."

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In October 2021 (red column), 59 thousand new homes were sold (NSA). Last year, 78 thousand homes were sold in October.

The all-time high for October was 105 thousand in 2005, and the all-time low for October was 23 thousand in 2010.

This was well below expectations of 801 thousand SAAR, and sales in the three previous months were revised down significantly. I'll have more later today.

by Calculated Risk on 11/24/2021 08:37:00 AM

The DOL reported:

In the week ending November 20, the advance figure for seasonally adjusted initial claims was 199,000, a decrease of 71,000 from the previous week's revised level. This is the lowest level for initial claims since November 15, 1969 when it was 197,000. The previous week's level was revised up by 2,000 from 268,000 to 270,000. The 4-week moving average was 252,250, a decrease of 21,000 from the previous week's revised average. This is the lowest level for this average since March 14, 2020 when it was 225,500. The previous week's average was revised up by 500 from 272,750 to 273,250.
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 decreased to 252,250.

The previous week was revised up.

Regular state continued claims decreased to 2,049,000 (SA) from 2,109,000 (SA) the previous week.

Weekly claims were well below the consensus forecast.

by Calculated Risk on 11/24/2021 08:33:00 AM

From the BEA: Gross Domestic Product, Third Quarter 2021 (Second Estimate); Corporate Profits, Third Quarter 2021 (Preliminary Estimate)

Real gross domestic product (GDP) increased at an annual rate of 2.1 percent in the third quarter of 2021, according to the "second" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 6.7 percent.

The GDP estimate released today is based on more complete source data than were available for the "advance" estimate issued last month. In the advance estimate, the increase in real GDP was 2.0 percent. The update primarily reflects upward revisions to personal consumption expenditures (PCE) and private inventory investment.
emphasis added

Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 1.6% to 1.7%. Residential investment was revised down from -7.7% to -8.3%. This was at the consensus forecast.

by Calculated Risk on 11/24/2021 07:00:00 AM

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

Mortgage applications increased 1.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 19, 2021.

... The Refinance Index increased 0.4 percent from the previous week and was 34 percent lower than the same week one year ago. The seasonally adjusted Purchase Index increased 5 percent from one week earlier. The unadjusted Purchase Index decreased 0.4 percent compared with the previous week and was 4 percent lower than the same week one year ago.

“The financial markets continue to discern the Federal Reserve’s policy path in the coming months in light of the current high growth, high inflation environment. Despite a fair amount of rate volatility last week, mortgage rates were higher, with the 30-year fixed rate increasing 4 basis points to 3.24 percent,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Despite the increase in rates, refinance applications rose slightly, driven by a 2 percent gain in conventional refinances. Borrowers continue to lock in mortgages in anticipation of higher rates in the future. Refinance applications were still more than 30 percent below a year ago, when the 30-year fixed rate was 32 basis points lower.”

Added Kan, “Purchase activity increased for the third straight week, as housing demand remains robust, even as the housing market approaches the typically slower holiday season. Both conventional and government loan applications increased, and the average loan size for a purchase loan was at $407,200, continuing its ongoing 2021 run of being mostly above $400,000.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.24 percent from 3.20 percent, with points decreasing to 0.36 from 0.43 (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.

With relatively low rates, the index remains somewhat elevated, but down sharply from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 4% year-over-year unadjusted.

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

by Calculated Risk on 11/23/2021 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 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 270 thousand initial claims, up from 268 thousand last week.

• Also at 8:30 AM, Gross Domestic Product, 3nd quarter 2020 (Second estimate). The consensus is that real GDP increased 2.1% annualized in Q3, up from 2.0% in the advance estimate of GDP.

• Also at 8:30 AM, Durable Goods Orders for October from the Census Bureau. The consensus is for a 0.2% increase in durable goods orders.

• At 10:00 AM, Personal Income and Outlays for October. The consensus is for a 0.2% increase in personal income, and for a 1.0% increase in personal spending. And for the Core PCE price index to increase 0.4%.

• Also at 10:00 AM, New Home Sales for October from the Census Bureau. The consensus is for 801 thousand SAAR, up from 800 thousand in September.

• At 10:00 AM, University of Michigan's Consumer sentiment index (Final for November). The consensus is for a reading of 66.8.

• At 2:00 PM, FOMC Minutes, Meeting of November 2-3, 2021

by Calculated Risk on 11/23/2021 05:43:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in October was 1.32%, down from 1.46% in September. Freddie's rate is down year-over-year from 2.89% in October 2020.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble, and peaked at 3.17% in August 2020 during the pandemic.

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 (if) they are employed.

Also - for multifamily - delinquencies were at 0.10%, down from the peak of 0.20% in April 2021.

by Calculated Risk on 11/23/2021 05:15:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 452,704,982.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	59.0%	---	≥70.0%1
Fully Vaccinated (millions)	196.0	---	≥2321
New Cases per Day3🚩	93,668	84,051	≤5,0002
Hospitalized3🚩	42,841	40,688	≤3,0002
Deaths per Day3	1,009	1,032	≤502
1 Minimum to achieve "herd immunity" (estimated between 70% and 85%). 2my goals to stop daily posts, 37-day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7-day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

IMPORTANT: For "herd immunity" most experts believe we need 70% to 85% of the total population fully vaccinated (or already had COVID).  Note: COVID will probably stay endemic (at least for some time).

KUDOS to the residents of the 5 states that have achieved 70% of total population fully vaccinated: Vermont at 72.6%, Rhode Island, Connecticut, Maine, and Massachusetts at 70.8%.

KUDOS also to the residents of the 16 states and D.C. that have achieved 60% of total population fully vaccinated: New York at 68.1%, New Jersey, Maryland, Washington, Virginia, New Hampshire, Oregon, District of Columbia, New Mexico, Colorado, California, Minnesota, Pennsylvania, Illinois, Delaware, Florida, and Hawaii at 60.7%.

The following 19 states have between 50% and 59.9% fully vaccinated: Wisconsin at 59.3%, Nebraska, Iowa, Utah, Michigan, Texas, Kansas, Arizona, Nevada, South Dakota, North Carolina, Alaska, Ohio, Kentucky, Montana, Oklahoma, South Carolina, Missouri and Indiana at 50.5%.

Next up (total population, fully vaccinated according to CDC) are Georgia at 49.3%, Tennessee at 49.3%, Arkansas at 49.0%, Louisiana at 48.6% and North Dakota at 48.6%.

Click on graph for larger image.

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

by Calculated Risk on 11/23/2021 11:19:00 AM

Today, in the Real Estate Newsletter: Final Look: Local Housing Markets in October

Excerpt:

Here is a summary of active listings for the housing markets that have reported in October. For these markets, inventory was down 5.9% in October MoM from September, and down 26.5% YoY.

Of these markets, inventories in Jacksonville, Miami and San Diego are at record lows. Sacramento and Washington, D.C. are the only markets with inventory up YoY in October (Austin is essentially unchanged YoY).

Inventory almost always declines seasonally in October, so the MoM decline is not a surprise. Last month, these markets were down 24.5% YoY, so the YoY decline in October is larger than in September. This is not indicating a slowing market.

In California, the C.A.R. reported inventory was down 18.3% YoY, but this isn’t included in the table since C.A.R. doesn’t report monthly numbers.

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