by Calculated Risk on 4/07/2025 03:15:00 PM

From Manheim Consulting today: Manheim Used Vehicle Value Index Shows Seasonal Decline in March Despite Strong Market Demand

Wholesale used-vehicle prices (on a mix, mileage, and seasonally adjusted basis) were lower in March compared to February. The Manheim Used Vehicle Value Index (MUVVI) declined to 202.6, which is a decrease of 0.2% from a year ago and also lower than the February levels. The seasonal adjustment caused the index to decline for the month, as non-seasonally adjusted values rose but not enough to account for the normal seasonal move. The non-adjusted price in March increased by 2.7% compared to February, moving the unadjusted average price up 0.4% year over year.
emphasis added

Click on graph for larger image.

This index from Manheim Consulting is based on all completed sales transactions at Manheim’s U.S. auctions.

The Manheim index suggests used car prices decreased in March (seasonally adjusted) and were down 0.2% YoY.

The tariffs will likely make imported used cars more attractive.

by Calculated Risk on 4/07/2025 12:28:00 PM

Today, in the Real Estate Newsletter: ICE Mortgage Monitor: Home Prices Continue to Cool

Brief excerpt:

Note: I made a mistake last week and posted this prior to the embargo lifting. My apologies to Intercontinental Exchange and all my readers.

House Price Growth Continues to Slow

Here is the year-over-year in house prices according to the ICE Home Price Index (HPI). The ICE HPI is a repeat sales index. ICE reports the median price change of the repeat sales. The index was up 2.7% year-over-year in February, down from 3.4% YoY in January.

• Home price growth is beginning to cool as modestly improved demand is running up against higher levels of inventory across most major markets

• The annual home price growth rate dipped to +2.7% in February from +3.4% the month prior, marking the sharpest single month of deceleration in the annual home price growth rate since early 2023, 2023, with an early look at March data via ICE's enhanced Home Price Index suggesting that price growth has cooled further to +2.2%

• On a seasonally adjusted basis, home prices rose by +0.11% in the month, equivalent to a seasonally adjusted annualized rate of +1.3%, the softest such growth in five months

• In simple terms, that means that if the current rate of monthly growth we’ve seen in recent months were to persist, it would result in annual home price growth continuing to slow as we make our way through Q1 and into Q2 2025

There is much more in the mortgage monitor.

There is much more in the newsletter.

by Calculated Risk on 4/07/2025 10:04:00 AM

Early in February, I expressed my "increasing concern" about the negative economic impact of "executive / fiscal policy errors", however, I concluded that post by noting that I was not currently on recession watch.

Now I am on recession watch, but still not yet predicting a recession for several reasons: the U.S. economy is very resilient and was on solid footing at the beginning of the year, the administration might reverse many of the tariffs (we've seen that before), and Congress might take back complete authority for tariffs.  Also, perhaps these tariffs are not enough to topple the economy.

Over the weekend, Goldman Sachs economists put out a note: Countdown to Recession

"If most of the April 9 tariffs do take effect, then the effective tariff rate will rise by an estimated 20pp once those increases and likely sectoral tariffs take effect, even allowing for some country-specific agreements at a later date. If so, we expect to change our forecast to a recession."

Here is some of the data I'm watching.  

Housing:  Housing is the basis of one of my favorite models for business cycle forecasting.  This graph uses new home sales, single family housing starts and residential investment.  (I prefer single family starts to total starts).   The purpose of this graph is to show that these three indicators generally reach peaks and troughs together. Note that Residential Investment is quarterly and single-family starts and new home sales are monthly.

Click on graph for larger image.

The arrows point to some of the earlier peaks and troughs for these three measures - and the most recent peak.

New home sales peaked in 2020 as pandemic buying soared.  Then new home sales and single-family starts turned down in 2021, but that was partly due to the huge surge in sales during the pandemic.   In 2022, both new home sales and single-family starts turned down in response to higher mortgage rates.   

This decline in residential investment would typically have suggested that a recession was coming, however I looked past the pandemic distortions and correctly predicted no recession!  The low level of existing home inventory led me to predict that new home sales would pick up - and that happened.  This is a reminder that we can't be a slave to any model.

This second graph shows the YoY change in New Home Sales from the Census Bureau.  Currently new home sales (based on 3-month average of NSA data) are down 4% year-over-year.

Usually when the YoY change in New Home Sales falls about 20%, a recession will follow.  An exception for this data series was the mid '60s when the Vietnam buildup kept the economy out of recession.   Another exception was in late 2021 - we saw a significant YoY decline in new home sales related to the pandemic and the surge in new home sales in the second half of 2020.  I ignored that downturn as a pandemic distortion.  Also note that the sharp decline in 2010 was related to the housing tax credit policy in 2009 - and was just a continuation of the housing bust.

The YoY change in new home sales in late 2022 and early 2023 suggested a possible recession.  But as I noted earlier, I was able to look past the pandemic distortion and was able to predict a pickup in new home sales due to the low level of existing home inventory and because homebuilders could offer mortgage incentives that would somewhat offset the sharp increase in mortgage rates.

There are no special circumstances now, and if this measure falls to off 20% a recession seems likely.

Yield Curve: The yield curve is a commonly used leading indicator.  I dismissed it when the yield curve inverted in 2019 and again in 2022. Both times dismissing the yield curve was correct (the recession in 2020 was obviously due to the pandemic, so we will never know if the yield curve failed to predict a recession in 2019).

Here is a graph of 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity from FRED since 1976.

 

The yield curve reverted to normal last year and is currently slightly positive at 0.33.  If this inverts, this might suggest a recession is coming.

Click here for interactive graph at FRED.

Heavy Truck (and Vehicle Sales): Another indicator I like to use is heavy truck sales.  This graph shows heavy truck sales since 1967 using data from the BEA. he dashed line is the March 2025 seasonally adjusted annual sales rate (SAAR) of 403 thousand. Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales were at 403 thousand SAAR in March, down from 436 thousand in February, and down 12.1% from 459 thousand SAAR in February 2025.

Usually, heavy truck sales decline sharply prior to a recession. Perhaps heavy truck sales will be revised up, but sales in March were somewhat weak.

On the other hand, light vehicle sales were strong in March.  

This graph shows light vehicle sales since the BEA started keeping data in 1967.   This is more of a concurrent indicator than heavy trucks. 

Light vehicle sales surged to 17.77 million SAAR in March, up 11.0% from February, and up 13.3% from March 2024 as some buyers rushed to beat the tariffs.

Unemployment: Two other concurrent indicators are the unemployment rate (using the "Sahm Rule") and weekly unemployment claims.

Here is a graph of the Sahm rule from FRED since 1959.

The rule was triggered in 2024 (slightly), but Dr. Claudia Sahm said at the time:

“I am not concerned that, at this moment, we are in a recession,” she told Fortune ... “This time really could be different,” Sahm said. “[The Sahm Rule] may not tell us what it’s told us in the past, because of these swings from labor shortages, with people dropping out of the labor force, to now having immigrants coming lately. That all can show up in changes in the unemployment rate, which is the core of the Sahm Rule.”

And weekly unemployment claims always rise sharply at the beginning of a recession (other events - like hurricane Katrina - can cause a temporary spike in weekly claims).

As I noted earlier, I'm not sure how to estimate the economic damage caused by these tariffs. And they might just go away (no one knows).  There are also boycotts of U.S. goods and less international tourism based on both the tariffs and the inflammatory rhetoric of the new administration.  

For now, I'll focus on the leading indicators (especially housing) and I'll update this post monthly while I'm on recession watch.  

by Calculated Risk on 4/07/2025 08:11:00 AM

Altos reports that active single-family inventory was up 2.3% week-over-week.

Inventory is now up 10.7% from the seasonal bottom in January and is increasing.  

Usually, inventory is up about 4% or 5% from the seasonal low by this week in the year.   So, 2025 is seeing a larger than normal pickup in inventory.

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 34.7% compared to the same week in 2024 (last week it was up 30.6%), and down 17.4% compared to the same week in 2019 (last week it was down 19.0%). 

Inventory will pass 2020 levels soon, and it now appears inventory will be close to 2019 levels towards the end of 2025.

This second inventory graph is courtesy of Altos Research.

As of April 4th, inventory was at 691 thousand (7-day average), compared to 676 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube

by Calculated Risk on 4/06/2025 06:11:00 PM

Weekend:
• Schedule for Week of April 6, 2025

• Recession Watch

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 200 and DOW futures are down 1,200 (fair value).

Oil prices were down over the last week with WTI futures at $61.99 per barrel and Brent at $65.58 per barrel. A year ago, WTI was at $88, and Brent was at $93 - so WTI oil prices are down about 25% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.21 per gallon. A year ago, prices were at $3.57 per gallon, so gasoline prices are down $0.36 year-over-year.

by Calculated Risk on 4/06/2025 08:56:00 AM

From the Association of American Railroads (AAR) AAR Data Center. Graph and excerpts reprinted with permission.

Recent changes in U.S. trade policy represent a notable shift from previous approaches. These developments will affect multiple sectors, including freight rail, where global trade accounts for approximately 38% of unit volume and 37% of total revenue. Even in stable times, railroads must constantly adjust to evolving economic conditions; they are operationally equipped to adapt to this latest round of policy change as well.

At present, rail traffic is holding steady. While some “soft” economic indicators, such as consumer confidence, have weakened in recent months, many “hard” economic metrics—including job gains, unemployment, and consumer spending—remain resilient. That continued strength has supported modest gains in rail volumes. That said, manufacturing remains mired in a prolonged period of weakness, limiting growth in several carload categories.
emphasis added

Click on graph for larger image.

This graph from the AAR shows their index ("The AAR’s Freight Rail Index (FRI) is defined as intermodal plus carloads excluding coal and grain. We exclude coal and grain because their carloads tend to rise or fall for reasons that have little to do with what’s going on in the broader economy.")

U.S. railroads originated 906,253 total carloads in March 2025, up 4.5% (39,342 carloads) over last March and the third year-over-year increase in total carloads over the past 15 months. Total carloads averaged 226,563 in March 2025, the most in six months and the most for March since 2022.
...
U.S. railroads also originated 1.10 million containers and trailers in March 2025, up 8.0% (82,151 units) over March 2024 and intermodal’s 19th consecutive year-over-year gain.

by Calculated Risk on 4/05/2025 07:19:00 PM

I am going on "recession watch" for only the 4th time in the 20+ years that I've been writing this blog. In December 2022 I went on "recession watch", but I noted "My sense is growth will stay sluggish in 2023, but the economy will avoid recession."  And the economy did avoid recession!

The other two times were in early 2007 (housing bust / financial crisis), and in March 2020 (pandemic). And I correctly called a recession.

Mostly I've made fun of the persistent recession callers!

Now I'm concerned about tariff policy impacting the economy.  Usually fiscal, executive and trade policy decisions wouldn't lead to an immediate recession, but these tariffs are a huge blunder.   There have been other unforced errors - like cutting basic research spending - but that is more of a long-term issue.

As an aside: Imagine a tech company announcing they were going to cut spending by eliminating R&D.  Their stock would plummet.  That is what the U.S. has done with some of the DOGE cuts.  

Some analysts have started forecasting a recession later this year due to the tariffs. For example, from Yahoo Finance: JPMorgan becomes the first Wall Street bank to forecast a US recession following Trump's tariffs

JPMorgan believes the US economy will enter a recession in the back half of 2025 as the impact of President Trump tariffs takes hold in the economy.

The firm's chief US economist Michael Feroli sees a two-quarter recession occurring in the back half of 2025 as GDP contracts by 1% in the third quarter of the year and by 0.5% in the fourth quarter. For the full-year 2025, Feroli's team projects GDP will fall by 0.3%.
...
Feroli added that a "recession in economic activity" will push the unemployment rate up to 5.3%.

I'm not sure how to estimate the economic damage caused by these tariffs. And they might just go away (no one knows).  There are also boycotts of U.S. goods and less international tourism based on both the tariffs and the inflammatory rhetoric of the new administration.  

On the other hand, the U.S. economy is very resilient and was on solid footing at the beginning of the year.

So, although I'm on "recession watch", I'm not currently predicting a recession.

These two Economist covers capture the rapid change over the last 6 months. The first is from October 2024.

Click on graph for larger image.

Just after the election, Fed Chair Powell said, "The recent performance of our economy has been remarkably good, by far the best of any major economy in the world." 

And in December, Powell said the US economy is the "envy of other large economies around the world".

The 2nd cover is the current edition.  "Ruination Day".  Ouch.

Mostly I'll be watching my favorite model for business cycle forecasting that uses new home sales (also housing starts and residential investment).

I'll also be watching the yield curve, vehicle sales, heavy truck sales and weekly unemployment claims - amoung other indicators.

To conclude: I'm now on recession watch, but I'm not predicting a recession.

by Calculated Risk on 4/05/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

• Moody's: Q1 2025 Apartment Vacancy Rate Highest Since 2010; Office Vacancy Rate at Record High

• Freddie Mac House Price Index Increased in February; Up 3.4% Year-over-year

• Asking Rents Mostly Unchanged Year-over-year

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

by Calculated Risk on 4/05/2025 08:11:00 AM

The key economic report this week is March CPI.

----- Monday, April 7th -----
No major economic releases scheduled.

----- Tuesday, April 8th -----
6:00 AM ET: NFIB Small Business Optimism Index for March.

----- Wednesday, April 9th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: FOMC Minutes, Meeting of March 18-19

----- Thursday, April 10th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 225 initial claims up from 219 thousand last week.

8:30 AM: The Consumer Price Index for March from the BLS. The consensus is for 0.1% increase in CPI (up 2.6% YoY) and a 0.3% increase in core CPI (up 3.0% YoY).

----- Friday, April 11th -----
8:30 AM: The Producer Price Index for March from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.3% increase in core PPI.

10:00 AM: University of Michigan's Consumer sentiment index (Preliminary for April).

by Calculated Risk on 4/04/2025 07:56:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So, I'm no longer tracking hospitalizations.

COVID Metrics
	Now	Week Ago	Goal
Deaths per Week	576	655	≤3501
1my goals to stop weekly posts. 🚩 Increasing number weekly for Deaths. ✅ Goal met.

Click on graph for larger image.

This graph shows the weekly (columns) number of deaths reported since Jan 2023.

Although weekly deaths met the original goal to stop posting in June 2023 (low of 314 deaths), I've continued to post since deaths are above the goal again - and I'll continue to post until weekly deaths are once again below the goal.

Weekly deaths are now decreasing following the winter pickup and just under double the low of last June.

And here is a graph I'm following concerning COVID in wastewater as of April 3rd:

This appears to be a leading indicator for COVID hospitalizations and deaths.  This has generally been moving down.

Nationally COVID in wastewater is "Low", down from "Moderate" two weeks ago according to the CDC.