by Calculated Risk on 11/14/2023 09:21:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned earlier when services less rent of shelter was up 7.6% year-over-year.  This has fallen sharply and is now up 3.0% YoY.

Click on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through September 2023.

Services were up 5.1% YoY as of October 2023, down from 5.2% YoY in September.

Services less rent of shelter was up 3.0% YoY in October, up from 2.8% YoY in September.

Earlier this year, a key question was: Would services ex-shelter inflation be persistent, or would it follow a similar pattern as goods?   This is a topic I discussed in Pandemic Economics, Housing and Monetary Policy: Part 2.

The second graph shows that goods prices started to increase year-over-year (YoY) in 2020 and accelerated in 2021 due to both strong demand and supply chain disruptions.

Durables were at -2.1% YoY as of October 2023, up from -2.2% YoY in September.

Commodities less food and energy commodities were unchanged YoY in October, unchanged from 0.0% YoY in September.

Goods inflation was transitory.

Here is a graph of the year-over-year change in shelter from the CPI report (through October) and housing from the PCE report (through September 2023)

Shelter was up 6.7% year-over-year in October, down from 7.1% in September. Housing (PCE) was up 7.2% YoY in September, down from 7.4% in August.

The BLS noted this morning: "The index for shelter continued to rise in October"

Core CPI ex-shelter was up 2.0% YoY in October, up from 1.9% in September.

by Calculated Risk on 11/14/2023 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in October on a seasonally adjusted basis, after increasing 0.4 percent in September, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 3.2 percent before seasonal adjustment.

The index for shelter continued to rise in October, offsetting a decline in the gasoline index and resulting in the seasonally adjusted index being unchanged over the month. The energy index fell 2.5 percent over the month as a 5.0-percent decline in the gasoline index more than offset increases in other energy component indexes. The food index increased 0.3 percent in October, after rising 0.2 percent in September. The index for food at home increased 0.3 percent over the month while the index for food away from home rose 0.4 percent.

The index for all items less food and energy rose 0.2 percent in October, after rising 0.3 percent in September. Indexes which increased in October include rent, owners' equivalent rent, motor vehicle insurance, medical care, recreation, and personal care. The indexes for lodging away from home, used cars and trucks, communication, and airline fares were among those that decreased over the month.

The all items index rose 3.2 percent for the 12 months ending October, a smaller increase than the 3.7-percent increase for the 12 months ending September. The all items less food and energy index rose 4.0 percent over the last 12 months, its smallest 12-month change since the period ending in September 2021. The energy index decreased 4.5 percent for the 12 months ending October, and the food index increased 3.3 percent over the last year.
emphasis added

CPI and core CPI were lower than expectated. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 11/13/2023 07:31:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Higher But Recover Ahead of Key Inflation Report

Mortgage rates began the day at the highest levels in nearly 2 weeks. The underlying bond market had been losing ground steadily since last Thursday and there was some follow-through to that negative momentum early today. Weaker bonds = higher rates, all other things being equal.

But bonds recovered from 10am through the end of the day and the specific bonds that underlie mortgage rates did even better than their Treasury benchmarks.[30 year fixed 7.58%]
emphasis added

Tuesday:
• At 6:00 AM ET, NFIB Small Business Optimism Index for October.

• At 8:30 AM, The Consumer Price Index for October from the BLS. The consensus is for a 0.1% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 3.3% year-over-year and core CPI to be up 4.1% YoY.

by Calculated Risk on 11/13/2023 01:26:00 PM

First, shutdowns are expensive, and many government employees continue to work (like the military), but don't get paid.  

In addition to the closings of National Parks, and many services, we will all be flying mostly blind without reports on employment, inflation, housing starts and more.  However, there will be some private data to fill the gap.  

The employment data for November has already been gathered since the BLS reference week was November 5th through 11th this year (one of the exceptions for when the reference week doesn't include the 12th).  If there is a shutdown, the first key missing reports will be New Home Sales, GDP and Personal Income & Outlays during the week of November 26th.

For housing, depending on the length of the shutdown, there might be an impact on existing home closings in November. If the shutdown lasts through the end of the month, I'd expect some decline in seasonally adjusted sales in November. If the shutdown only lasts a week or so, there would probably be little impact. Some issues could be Tax transcripts, Flood Certs, and SS# Authorization.

Also, a shutdown increases uncertainty, and that might push up mortgage rates (investors hate uncertainty).   Hopefully a shutdown will be avoided.

by Calculated Risk on 11/13/2023 10:17:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-November

A brief excerpt:

Last week, in Part 1: Current State of the Housing Market; Overview for mid-November I reviewed home inventory and sales.
...
Most measures of house prices have shown an increase in prices over the last several months, and a key question I discussed in July is Will house prices decline further later this year? I will revisit this question soon.

Other measures of house prices suggest prices will be up further YoY in the September Case-Shiller index. The NAR reported median prices were up 2.8% YoY in September, down from 3.9% YoY in August. ICE / Black Knight reported prices were up 4.3% YoY in September, up from 3.7% YoY in August to new all-time highs, and Freddie Mac reported house prices were up 5.2% YoY in September, up from 4.3% YoY in August - and also to new all-time highs.

Here is a comparison of year-over-year change in the FMHPI, median house prices from the NAR, and the Case-Shiller National index.

The FMHPI and the NAR median prices appear to be leading indicators for Case-Shiller. Based on recent monthly data, and the FMHPI, the YoY change in the Case-Shiller index will increase further in the report for September.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 11/13/2023 08:19:00 AM

Altos reports that active single-family inventory was up slightly week-over-week.  This is the latest in the year that inventory was still increasing in this series!  Inventory will start decreasing seasonally soon (for Thanksgiving and Christmas).

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of November 10th, inventory was at 567 thousand (7-day average), compared to 567 thousand the prior week.   

Year-to-date, inventory is up 15.5%.  And inventory is up 39.6% from the seasonal bottom 30 weeks ago.

The second graph shows the seasonal pattern for active single-family inventory since 2015.

The red line is for 2023.  The black line is for 2019.  Note that inventory is up from the record low for the same week in 2021, but below last year and still well below normal levels.

Inventory was down 0.9% compared to the same week in 2022 (last week it was down 1.5%), and down 36.5% compared to the same week in 2019 (last week down 37.9%). 

In 2022, inventory peaked at the end of October (the latest in the year inventory had peaked in this series until this year). I now expect inventory to be up YoY soon.

Inventory is now solidly above the same week in 2020 levels (dark blue line).

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 11/12/2023 06:43:00 PM

Weekend:
• Schedule for Week of November 12, 2023

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 futures are down 5 and DOW futures are down 44 (fair value).

Oil prices were down over the last week with WTI futures at $77.03 per barrel and Brent at $81.28 per barrel. A year ago, WTI was at $89, and Brent was at $96 - so WTI oil prices were down 13% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.33 per gallon. A year ago, prices were at $3.78 per gallon, so gasoline prices are down $0.45 year-over-year.

by Calculated Risk on 11/12/2023 01:29:00 PM

If we look at the "dot plot" from the September FOMC projections, the median projection is for the Fed Funds rate to decline to 5.125% in Q4 2024 (from the current 5.25% to 5.5% range). That is one 25bp rate cut in 2024.

Goldman Sachs economists are projecting the first rate cut in Q4 2024:

We continue to expect that rates cuts will start in 2024Q4 and proceed at a pace of 25bp per quarter

BofA economists are still projecting one more rate hike, and then three 25bp cuts in 2024 starting in Q2 2024.

Market participants are pricing in the first rate cut at the June 2024 FOMC meeting, followed by 2 more 25bp cuts in 2024 lowering the Fed Funds rate to 4.50% to 4.75% by December 2024.

It is possible the Fed could raise rates one more time, but my sense is the Fed is done.  Right now, I'd guess the first rate cut will happen in mid-2024, depending on inflation and economic weakness.

by Calculated Risk on 11/11/2023 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• 2nd Look at Local Housing Markets in October

• Part 1: Current State of the Housing Market; Overview for mid-November

• Inventory will Tell the Tale

• 1st Look at Local Housing Markets in October

• ICE (Black Knight) Mortgage Monitor: "It’s fair to expect prices to weaken later in 2023

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 11/11/2023 08:11:00 AM

The key economic reports this week are October CPI, Retail Sales, and Housing Starts.

For manufacturing, October industrial production, and the November New York, Philly and Kansas City Fed surveys, will be released this week.

----- Monday, November 13th -----
No major economic releases scheduled.

----- Tuesday, November 14th -----
6:00 AM: NFIB Small Business Optimism Index for October.

8:30 AM: The Consumer Price Index for October from the BLS. The consensus is for a 0.1% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 3.3% year-over-year and core CPI to be up 4.1% YoY.

----- Wednesday, November 15th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM ET: Retail sales for October will be released.

The consensus is for a 0.3% decrease in retail sales.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

8:30 AM: The Producer Price Index for October from the BLS. The consensus is for a 0.1% increase in PPI, and a 0.3% increase in core PPI.

8:30 AM: The New York Fed Empire State manufacturing survey for November. The consensus is for a reading of -2.6, up from -4.6.

During the day: The AIA's Architecture Billings Index for October (a leading indicator for commercial real estate).

----- Thursday, November 16th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 222 thousand initial claims, up from 217 thousand last week.

8:30 AM: the Philly Fed manufacturing survey for November. The consensus is for a reading of -11.0, down from -9.0.

9:15 AM: The Fed will release Industrial Production and Capacity Utilization for October.

This graph shows industrial production since 1967.

The consensus is for a 0.4% decrease in Industrial Production, and for Capacity Utilization to decrease to 79.4%.

10:00 AM: The November NAHB homebuilder survey. The consensus is for a reading of 40, unchanged from 40. Any number below 50 indicates that more builders view sales conditions as poor than good.

11:00 AM: the Kansas City Fed manufacturing survey for November.

----- Friday, November 17th -----
8:30 AM: Housing Starts for October.

This graph shows single and total housing starts since 1968.

The consensus is for 1.345 million SAAR, down from 1.358 million SAAR.

10:00 AM: State Employment and Unemployment (Monthly) for October 2023