by Calculated Risk on 3/04/2025 09:38:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family Serious Delinquency Rates Increased in January

Excerpt:

Freddie Mac reported that the Single-Family serious delinquency rate in January was 0.61%, up from 0.59% December. Freddie's rate is up year-over-year from 0.55% in January 2024, however, this is close to the pre-pandemic level of 0.60%.

Some of the recent increase in the 90+ day delinquency rate is probably related to the hurricanes last year.

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.

Fannie Mae reported that the Single-Family serious delinquency rate in January was 0.57%, up from 0.56% in December. The serious delinquency rate is up year-over-year from 0.54% in January 2024, however, this is below the pre-pandemic lows of 0.65%.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

There is much more in the article.

by Calculated Risk on 3/04/2025 08:28:00 AM

From housing economist Tom Lawler: Federal Reserve Earnings Still Running Negative; No Remittances to Treasury for a While

The sharp runup in short-term interest rates over the last few years that followed the Federal Reserve’s huge purchases of long-term Treasuries and MBS at extremely low interest rates has resulted in negative earnings at the Federal Reserve since the latter part of 2022. The reason, of course, is that the Federal Reserve “funded” the bulk of these long-term fixed rate assets with increases in interest-bearing very short-term liabilities – mainly depository institution deposits (reserves) and repos --with interest rates tied to the federal funds rate. While the Fed has more interest earning assets than interest-bearing liabilities – with the “gap” mainly reflecting Federal Reserve Notes outstanding (currency) and Treasury general account deposits – the sharp increase the federal funds rate resulted in interest expense surging relative to the interest income on the Fed’s long duration assets.

Below is a table showing Federal Reserve net income – the vast bulk of which reflects net interest income – from 2008 to 2024 (2024 is my estimate), as well as Fed remittances to the Treasury as shown in the Fed’s financials (more on this later).

As the table shows, Federal Reserve net income was substantially negative in 2023 and 2024, with a combined net loss in these two years of almost $200 billion.

At first glance one might think that this table suggests the Treasury remitted almost $200 billion to the Federal Reserve over the last two years. That is not, however, the case. If the Federal Reserve books a net loss, then it “books” a negative remittance to the Treasury but it also “books” an increase in its “deferred asset – remittance to Treasury.” This deferred asset reflects the fact that the Treasury does not in fact remit any funds to the Fed when the Fed books a loss. Rather, the deferred asset balance reflects the amount of positive net income the Fed would earn in the future without remitting any funds to the Treasury. For example, if this deferred asset balance were $200 billion and over the next four years the Fed’s net income totaled $200 billion, then the Fed would not remit any funds to the Treasury over those four years.

Weekly data on this deferred asset balance is from the Fed’s H4.1 release, and is available in the FRED database. Here is a chart from 9/7/22 to 2/26/25.

As of 2/26/2025, the Fed’s “deferred asset-remittance to Treasury was -$223.98 billion. Note that (1) this balance has continued to grow in the first 8 weeks of this year, suggesting that Fed net income was still negative over this period; and (2) the growth in the negative balance has slowed, suggesting that net losses are shrinking. This of course is not surprising, as the funds rate is 100 basis points lower now than prior to mid-September of last year.

Trying to predict Fed net income over the next year of two depends very heavily on projections of the federal funds rate, and depends somewhat on the pace of balance sheet reduction and the Fed’s reinvestment strategy. However, it is highly likely that the Fed will not be remitting any funds to Treasury anytime soon.

Chart of the Day: When Will Quantitative Tightening Begin?

Data through 2/26/2025

by Calculated Risk on 3/03/2025 07:41:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Roughly Unchanged Over The Weekend

Mortgage rates faced a very small threat of a very small increase this morning. The underlying bond market was in weaker territory to start the day and that typically means mortgage lenders raise rates. Indeed, many lenders were slightly higher at first.

But just as the first lenders were publishing rates for the day, the ISM Manufacturing Index (an important economic report that often causes a reaction in bonds) was released. The results were good for bonds, thus allowing mortgage lenders to set rates in line with Friday's latest levels, on average.... [30 year fixed 6.74%]
emphasis added

Tuesday:
• No major economic releases scheduled.

by Calculated Risk on 3/03/2025 06:18:00 PM

Wards Auto released their estimate of light vehicle sales for January: Despite Affordability Headwind, U.S. Light-Vehicle Sales Rise 3.4% in February (pay site).

Continuing January’s trend, market strength was at the two far ends of the affordability scale, as entry-price cars and lower-cost CUVs posted big gains, while the same was true in most premium-price segments. The range of vehicles generally thought of as the bread-and-butter of the market, non-luxury compact and midsize cars, CUVs and SUVs, all recorded big declines. However, even when including lower-price vehicles, sales of non-luxury sedans and compact/midsize CUVs and SUVs were down 3.8% in January-February, which really is indicating a continued affordability issue – at least compared with pre-2020 (pandemic) history.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards' estimate for February (red).

Sales in February (16.00 million SAAR) were up 2.5% from January, and up 2.1% from February 2024.

Sales in February were slightly above the consensus forecast.

The second graph shows light vehicle sales since the BEA started keeping data in 1967.

This was the best February since 2020.

by Calculated Risk on 3/03/2025 01:59:00 PM

On Friday, I noted: Q1 GDP Tracking: Wide Range, GDPNow Goes Negative

GDPNow from the Atlanta Fed went strongly negative in the most recent reading: "The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the first quarter of 2025 is -1.5 percent on February 28".

GDPNow is an excellent tracking model, however, the January surge in imports - especially for gold - caused the model to move negative. As the Atlanta Fed noted: "the contribution of net exports to first-quarter real GDP growth fell from -0.41 percentage points to -3.70 percentage points".

Usually there would be an offsetting increase in inventories, but that is a lagging indicator. This is a short-term distortion and will balance out over the next month or so.  I don't expect negative GDP in Q1.

by Calculated Risk on 3/03/2025 11:10:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in January and a Look Ahead to February Sales

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in January.

The big story for January was that existing home sales increased year-over-year (YoY) for the fourth consecutive month following year-over-year declines every month since July 2021. However, sales in January, at 4.08 million on a seasonally adjusted annual rate basis (SAAR) were down from December and still historically low. Sales averaged almost 5.5 million SAAR in the January 2017-2020 period. So, sales were still about 25% below pre-pandemic levels.
...
Here is a look at months-of-supply using NSA sales. Since this is NSA data, it is likely this is close to the seasonal low for months-of-supply.

Miami is off the charts!
...
More local data coming in March for activity in February!

There is much more in the article.

by Calculated Risk on 3/03/2025 10:17:00 AM

From the Census Bureau reported that overall construction spending decreased:

Construction spending during January 2025 was estimated at a seasonally adjusted annual rate of $2,192.5 billion, 0.2 percent below the revised December estimate of $2,196.0 billion. The January figure is 3.3 percent above the January 2024 estimate of $2,122.2 billion.
emphasis added

Private spending decreased and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,686.0 billion, 0.2 percent below the revised December estimate of $1,690.1 billion. ...

In January, the estimated seasonally adjusted annual rate of public construction spending was $506.6 billion, 0.1 percent above the revised December estimate of $505.9 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Private residential (red) spending is 4.9% below the peak in 2022.

Private non-residential (blue) spending is at a new peak.

Public construction spending is 0.1% below the peak in November 2024.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 3.1%. Private non-residential spending is up 1.8% year-over-year. Public spending is up 5.9% year-over-year.

This was below consensus expectations; however, spending for the previous two months was revised up.

by Calculated Risk on 3/03/2025 10:00:00 AM

(Posted with permission). The ISM manufacturing index indicated expansion. The PMI® was at 50.3% in February, down from 50.9% in January. The employment index was at 47.6%, down from 50.3% the previous month, and the new orders index was at 48.6%, down from 52.1%.

From ISM: Manufacturing PMI® at 50.3% February 2025 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector expanded for the second month in a row in February after 26 consecutive months of contraction, say the nation's supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The Manufacturing PMI® registered 50.3 percent in February, 0.6 percentage point lower compared to the 50.9 percent recorded in January. The overall economy continued in expansion for the 58th month after one month of contraction in April 2020. (A Manufacturing PMI® above 42.3 percent, over a period of time, generally indicates an expansion of the overall economy.) The New Orders Index dropped back into contraction territory after expanding for three months, registering 48.6 percent, 6.5 percentage points lower than the 55.1 percent recorded in January. The February reading of the Production Index (50.7 percent) is 1.8 percentage points lower than January’s figure of 52.5 percent. The index expanded for the second month in a row after eight months in contraction. The Prices Index surged further into expansion (or ‘increasing’) territory, registering 62.4 percent, up 7.5 percentage points compared to the reading of 54.9 percent in January. The Backlog of Orders Index registered 46.8 percent, up 1.9 percentage points compared to the 44.9 percent recorded in January. The Employment Index registered 47.6 percent, down 2.7 percentage points from January’s figure of 50.3 percent.
emphasis added

This suggests manufacturing expanded in February.  This was below the consensus forecast.

by Calculated Risk on 3/03/2025 08:11:00 AM

Altos reports that active single-family inventory was down 0.1% week-over-week.

Inventory is now up 2.4% from the seasonal bottom seven weeks ago in January and should start increasing seasonally in March.

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

Click on graph for larger image.

The red line is for 2025.  The black line is for 2019.  

Inventory was up 28.3% compared to the same week in 2024 (last week it was up 28.7%), and down 21.8% compared to the same week in 2019 (last week it was down 21.9%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels has closed significantly!

This second inventory graph is courtesy of Altos Research.

As of Feb 28th, inventory was at 639 thousand (7-day average), compared to 640 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube

by Calculated Risk on 3/02/2025 06:22:00 PM

Weekend:
• Schedule for Week of March 2, 2025

Monday:
• At 10:00 AM ET, ISM Manufacturing Index for February. The consensus is for the ISM to be at 50.8, down from 50.9 in January. 

• At 10:00 AM, Construction Spending for January. The consensus is for a 0.2% increase in construction spending.

• All day, Light vehicle sales for February. Sales were at 15.6 million in January (Seasonally Adjusted Annual Rate). The consensus is for an increase in sales to 15.9 million SAAR.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 17 and DOW futures are up 55 (fair value).

Oil prices were down over the last week with WTI futures at $70.10 per barrel and Brent at $73.16 per barrel. A year ago, WTI was at $81, and Brent was at $85 - so WTI oil prices are down about 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.04 per gallon. A year ago, prices were at $3.33 per gallon, so gasoline prices are down $0.29 year-over-year.