by Calculated Risk on 12/22/2021 08:33:00 AM

From the BEA: Gross Domestic Product (Third Estimate), Corporate Profits (Revised Estimate), and GDP by Industry, Third Quarter 2021

Real gross domestic product (GDP) increased at an annual rate of 2.3 percent in the third quarter of 2021, according to the "third" estimate released by the Bureau of Economic Analysis. In the second quarter, real GDP increased 6.7 percent.

The “third” estimate of GDP released today is based on more complete source data than were available for the "second" estimate issued last month. In the second estimate, the increase in real GDP was 2.1 percent. The update primarily reflects upward revisions to personal consumption expenditures (PCE) and private inventory investment that were partly offset by a downward revision to exports. Imports, which are a subtraction in the calculation of GDP, were revised down.
emphasis added

Here is a Comparison of Third and Second Estimates. PCE growth was revised up from 1.7% to 2.0%. Residential investment was revised up from -8.3% to -7.7%. 

by Calculated Risk on 12/22/2021 07:00:00 AM

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

Mortgage applications decreased 0.6 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending December 17, 2021.

... The Refinance Index increased 2 percent from the previous week and was 42 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 3 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 9 percent lower than the same week one year ago.

“Mortgage applications fell last week, driven by a 3 percent decline in purchase applications. Both conventional and government purchase applications were down, while the average purchase loan increased for the second straight week to $416,200 – the second highest amount ever. The elevated loan size is an indication that activity is more on the higher end of the market,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Home-price appreciation growth remains faster than historical averages and inventory, particularly for starter homes, continues to trail strong demand.”

Added Kan, “The 30-year fixed rate decreased to 3.27 percent – its lowest level in four weeks – and helped spur an increase in refinances across all loan types. FHA and VA refinances jumped 4 percent and 12 percent, respectively.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) decreased to 3.27 percent from 3.30 percent, with points increasing to 0.41 from 0.39 (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 slightly elevated, but down sharply from last year.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 9% year-over-year unadjusted.

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

by Calculated Risk on 12/21/2021 07:45:00 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, Gross Domestic Product, 3rd quarter 2021 (Third estimate). The second estimate of GDP was 2.1%.

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

• At 10:00 AM, Existing Home Sales for November from the National Association of Realtors (NAR). The consensus is for 6.20 million SAAR, down from 6.34 million. Housing economist Tom Lawler expects the NAR to report sales of 6.45 million SAAR for November.

From CR on COVID (mostly focus on hospitalizations and deaths, although new cases are rising rapidly):

The CDC is the source for all data.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	61.6%	---	≥70.0%1
Fully Vaccinated (millions)	204.6	---	≥2321
New Cases per Day3🚩	149,331	119,281	≤5,0002
Hospitalized3🚩	60,907	58,452	≤3,0002
Deaths per Day3🚩	1,188	1,148	≤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.

Click on graph for larger image.

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

The scale might change soon (almost record number of new cases reported today).

by Calculated Risk on 12/21/2021 02:42:00 PM

CR Note: I've mentioned the increasing use of non-QM loans before.

Here is an interesting article on non-QM loans By Bill Conroy at Housing Wire: Move over Fannie, the non-QM loan is in the fast lane. Some brief excerpts:

The universe of non-QM single-family mortgage products is broad and difficult to define in a few words, but the definition matters because a huge slice of the borrowers in this non-QM category represent the heartbeat of the U.S. economy. Within its sweep are the self-employed as well as entrepreneurs who buy single-family investment properties — and who can’t qualify for a mortgage using traditional documentation, such as payroll income. As a result, they must rely on alternative documentation, including bank statements, assets or, in the case of rental properties, debt-service coverage ratios.
...
Non-QM mortgages also go to a slice of borrowers facing credit challenges — such as a recent bankruptcy or slightly out-of-bounds credit scores. The loans may include interest-only, 40-year terms or other creative financing features often designed to lower monthly payments on the front-end of the mortgage — often with an eye toward refinancing or selling the property in the short-term future.

The size of the market is relatively small (about $25 billion in 2021 but growing). And the underwriting is generally solid, but this will be a segment of mortgage lending to watch.

by Calculated Risk on 12/21/2021 11:47:00 AM

Today, in the Real Estate Newsletter: 5th Look at Local Housing Markets in November

Excerpt:

This update adds Boston, Indiana, and Washington, D.C.
...
Here is a summary of active listings for these housing markets in November. Inventory was down 15.3% in November month-over-month (MoM) from October, and down 26.0% year-over-year (YoY).

Inventory almost always declines seasonally in November, so the MoM decline is not a surprise. Last month, these markets were down 22.5% YoY, so the YoY decline in November is larger than in October. This isn’t indicating a slowing market.

Notes for all tables:

1. New additions to table in BOLD.

2. Northwest (Seattle), North Texas (Dallas), and Santa Clara (San Jose), Jacksonville, Source: Northeast Florida Association of REALTORS®

3. Totals do not include Denver or Minneapolis (included in state totals).

by Calculated Risk on 12/21/2021 09:45:00 AM

From the Cleveland Fed: What’s Holding Back Employment in the Recovery from the COVID-19 Pandemic?. Excerpts:

Bureau of Labor Statistics data indicate that five million jobs lost during the pandemic have not been recovered, but it is difficult to ascertain how many workers will return to available jobs. The Census Bureau’s Household Pulse Survey includes a detailed set of reasons for nonemployment, including households’ responses to the pandemic that provide a new perspective on reasons for not working. Among prime-age workers, reasons for nonemployment during the SARS-CoV-2 (COVID-19) pandemic have shifted substantially from mostly labor demand reasons to primarily labor supply inhibitors. At this point, most nonemployment is connected to three categories: sickness and concerns about COVID-19; child- and eldercare responsibilities; and the residual category “other reasons.” The persistence of these answers and the characteristics of individuals’ providing these answers point to barriers to fully recovering prior employment rates.
emphasis added
...
Click on graph for larger image.

The Household Pulse Survey shows that while the initial shock from the pandemic affected mostly labor demand, persistent supply-side barriers have kept previously employed people from returning to employment. There are various distinct reasons why people are not returning to employment, and the severity of these issues varies by demographic group. Some of these reasons for nonemployment point to persistent shifts in the labor force that may not resolve with the end of the pandemic. The lack of affordable and accessible childcare largely affects women with young children and will likely continue to keep some of these women out of the labor force even after the end of the pandemic because of the increased cost of childcare and the long-term job separations experienced by these mothers. Differences in virus fears and virus risks may make return to employment slower for Black workers, especially in areas with low vaccination rates. The largest category of reasons is “other reasons,” but lower-income and less-educated individuals are substantially overrepresented in this category. These individuals have long had lower workforce participation rates, and research on the benefits cliffs has revealed many situations in which increasing work can lower family incomes because of discrete cutoffs for other benefits. These distinct barriers all have different implications for the labor force and different solutions beyond ending the current public health crisis. By distinguishing which reasons for nonemployment are most limiting for each demographic group, we can better design policies that will help address specific issues for the populations most affected.

by Calculated Risk on 12/20/2021 09:00:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Lower, But Could See Some Volatility This Week

For most lenders, mortgage rates edged slightly higher at the start of the holiday-shortened week. The exception would be among those lenders who made changes to their rate offerings on Friday afternoon in response to deteriorating market conditions. The unequivocal comparison would be with Friday morning's rates, in which case today's rates are higher.
...
Looking ahead, the bond market will be closed on Friday and open for only a half day on Thursday. Most mortgage lenders will not be updating rate sheets on Friday, and they will shy away from making big changes on Thursday unless massive market movement forces their hand.[30 year fixed 3.17%]
emphasis added

From CR on COVID (mostly focus on hospitalizations and deaths):

The CDC is the source for all data.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	61.5%	---	≥70.0%1
Fully Vaccinated (millions)	204.1	---	≥2321
New Cases per Day3🚩	132,659	117,521	≤5,0002
Hospitalized3🚩	58,793	57,585	≤3,0002
Deaths per Day3🚩	1,169	1,131	≤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.

Click on graph for larger image.

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

by Calculated Risk on 12/20/2021 05:50:00 PM

Notes: The expansion to the Panama Canal was completed in 2016 (As I noted a few years ago), and some of the traffic that used the ports of Los Angeles and Long Beach is probably going through the canal. This might be impacting TEUs on the West Coast.

Also, incoming port traffic is backed up significantly in the LA area with numerous ships at anchor waiting to unload.

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 was down 0.8% in November compared to the rolling 12 months ending in October.   Outbound traffic was down 2.0% 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 February or March depending on the timing of the Chinese New Year.

2021 started off incredibly strong for imports - and with the backlog of ships, will likely stay strong into 2022 (no break again in February or March).

It is disappointing that traffic dipped in November compared to the previous months so there are quite a few ships still waiting to unload.

Imports were down 10% YoY in November, and exports were down 22% YoY.

by Calculated Risk on 12/20/2021 05:40:00 PM

Today, in the Real Estate Newsletter: Supply Chain Disruptions and Housing Inventory

Excerpt:

An interesting question: Is how many of these units under construction are due to supply chain constraints. Census will release data next year on the length of time from start to completion, and that will probably show long delays in 2021. In 2020, it took an average of 6.8 months from start to completion for single family homes, and 15.4 months for buildings with 2 or more units.

For single family homes, starts have been at about the same level for over a year, so - in normal times - we’d expect completions to be at about the same level as starts. With some simple calculations, it seems that supply chain issues have delayed the completion of somewhere between 70,000 and 150,000 single family homes that would have normally been completed by November.

by Calculated Risk on 12/20/2021 04:00:00 PM

Note: This is as of November 30th.

From the MBA: MBA Loan Monitoring Survey: Share of Mortgage Loans in Forbearance Decreases to 1.67%

The Mortgage Bankers Association’s (MBA) new monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance decreased by 39 basis points from 2.06% of servicers’ portfolio volume in the prior month to 1.67% as of November 30, 2021. According to MBA’s estimate, 835,000 homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 16 basis points to 0.76%. Ginnie Mae loans in forbearance decreased 42 basis points to 2.10%, and the forbearance share for portfolio loans and private-label securities (PLS) declined 106 basis points to 3.94%.

“The share of loans in forbearance in November declined – albeit at a slower pace than October – as borrowers continued to near the expiration of their forbearance plans and moved into permanent loan workout solutions,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis.

Total loans serviced that were current (not delinquent or in foreclosure) as a percent of servicing portfolio volume (#) rose to 94.58% in November from 94.32% in October (on a non-seasonally adjusted basis). Total completed loan workouts from 2020 and onward (repayment plans, loan deferrals/partial claims, loan modifications) that were current as a percent of total completed workouts declined to 83.69% last month from 84.04% in October.
emphasis added

Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  The number of forbearance plans is decreasing rapidly recently since many homeowners have reached the end of the 18-month term.