by Calculated Risk on 6/19/2025 08:11:00 PM

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

Friday:
• At 8:30 AM ET, the Philly Fed manufacturing survey for June. The consensus is for a reading of 0.0, up from -4.0 last month.

by Calculated Risk on 6/19/2025 04:03:00 PM

Here are the daily travel numbers from the TSA.

This data is as of June 17, 2025.

Click on graph for larger image.

This data shows the 7-day average of daily total traveler throughput from the TSA for the last 6 years.

Air travel is essentially unchanged YoY (down about 1.1% YoY).

The red line is the seven-day average for 2025.  Air travel is down slightly from last year.

by Calculated Risk on 6/19/2025 10:57:00 AM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For May, Realtor.com reported inventory was up 31.5% YoY, but still down 14.4% compared to the 2017 to 2019 same month levels. 

Here is their weekly report: Weekly Housing Trends: Latest as of June 14

• Active inventory climbed 28.1% year over year

The number of homes actively for sale remains on a strong upward trajectory, now 28.1% higher than this time last year. This represents the 84th consecutive week of annual gains in inventory. There were more than 1 million homes for sale again last week, marking the seventh week in a row over the threshold and the highest inventory level since December 2019.

• New listings—a measure of sellers putting homes up for sale—rose 5.7% year over year

New listings rose again last week on an annual basis, up 5.7% compared with the same period last year, a slightly faster growth compared with the previous two weeks.

• The median list price was unchanged year over year

The median list price was flat (0% change) year over year this week and is down 0.4% year to date. The median list price per square foot—which adjusts for changes in home size—rose 0.7% year over year.

With inventory climbing, and sales depressed, months-of-supply is at the highest level since 2016 (excluding start of pandemic) putting downward pressure on house prices in an increasing number of areas.

by Calculated Risk on 6/19/2025 08:13:00 AM

A year ago I wrote: The Art of the Soft Landing

A few excerpts and an updated graph ...

The "Art of the Soft Landing" requires that the Fed reduce rates quick enough to keep economic growth positive, and slow enough not to reignite inflation.  My view is a soft landing is achieved if growth stays positive, inflation returns to target, and the yield curve flattens or reverts to normal (long yields higher than short yields).

The Fed lowered rates and GDP growth was solid in 2024, and although GDP growth was slightly negative in Q1 2025, this was due to trade related distortions and all indications are GDP will be positive in Q2.  

Inflation hasn't quite returned to target with PCE core inflation at 2.5% YoY in April. However, inflation appeared to be on the way to the Fed's 2% target until the trade war started.

And here is an updated graph of 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity from FRED for the last 5 years.

The yield curve is no longer inverted.  

Click here for interactive graph at FRED.

With the significant changes to policy, the Fed didn't completely meet my definition of a "soft landing", but it was close - and I think they deserve credit.

by Calculated Risk on 6/18/2025 09:09:00 PM

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

Thursday:
• All US markets will be closed in observance of Juneteenth National Independence Day

by Calculated Risk on 6/18/2025 03:26:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: ABI May 2025: Despite persistent softness, fewer firms report declining billings

The modest uptick in the AIA/Deltek Architecture Billings Index (ABI) score to 47.2 for the month means that fewer firms reported a decrease than in April. In addition, inquiries into new work increased this month for the first time since January, reflecting the modest degree of stabilization in the economy recently. However, the value of new signed design contracts continued to decline, indicating that while clients are starting to explore new projects, they remain hesitant to sign a contract committing to them.

Business conditions remained soft at firms in all regions of the country in May, although firms located in the South came close to reporting growth. The pace of the decline in that region has slowed over recent months, and firms in that region may be the first to experience growth again. However, firms of all specializations reported declining billings this month, although the pace of the decline slowed at firms with a multifamily residential specialization. Firms specializing in that type of work, as well as in institutional work, look like they’ll be the first ones to turn the corner to growth when conditions start to improve.
...
The ABI score is a leading economic indicator of construction activity, providing an approximately nine-to-twelve-month glimpse into the future of nonresidential construction spending activity. The score is derived from a monthly survey of architecture firms that measures the change in the number of services provided to clients.
emphasis added

• Northeast (43.6); Midwest (43.5); South (49.2); West (44.3)

• Sector index breakdown: commercial/industrial (43.8); institutional (46.2); multifamily residential (46.1)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 47.2 in May, down from 43.2 in April.  Anything below 50 indicates a decrease in demand for architects' services.

This index has indicated contraction for 30 of the last 32 months.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This index usually leads CRE investment by 9 to 12 months, so this index suggests a slowdown in CRE investment throughout 2025 and into 2026.

Multi-family billings have been below 50 for the 34 consecutive months.  This suggests we will see continued weakness in multi-family starts.

by Calculated Risk on 6/18/2025 02:08:00 PM

Statement here.

Fed Chair Powell press conference video here or on YouTube here, starting at 2:30 PM ET.

Here are the projections.  The projections are pretty bearish.

The BEA's advance estimate for Q1 GDP showed real growth at -0.2% annualized. There is a wide range of estimates for Q2 GDP, but it is forecast to be over 3.0% (as Q1 distortions reverse). That would put real growth on pace to be at the low end of the March FOMC projections for Q4 over Q4.  So, GDP was revised down for 2025.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2025	2026	2027
Jun 2025	1.2 to 1.5	1.5 to 1.8	1.7 to 2.0
Mar 2025	1.5 to 1.9	1.6 to 1.9	1.6 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 4.2% in May after averaging 4.1% for Q1.  The unemployment rate was revised up.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2025	2026	2027
Jun 2025	4.4 to 4.5	4.3 to 4.6	4.2 to 4.6
Mar 2025	4.3 to 4.4	4.2 to 4.5	4.1 to 4.4

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of April 2025, PCE inflation increased 2.1 percent year-over-year (YoY). There will likely be some increase in PCE inflation from trade policy.

Without policy changes (tariffs) it appears inflation would be well below the FOMC forecast! The projections for Q4 2025 PCE inflation were revised up.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2025	2026	2027
Jun 2025	2.8 to 3.2	2.3-2.6	2.0 to 2.2
Mar 2025	2.6 to 2.9	2.1 to 2.3	2.0 to 2.1

PCE core inflation increased 2.5 percent YoY in April. The projections for core PCE inflation Q4 2025 were revised up.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2025	2026	2027
Jun 2025	2.9 to 3.4	2.3-2.6	2.0 to 2.2
Mar 2025	2.7 to 3.0	2.1 to 2.4	2.0 to 2.1

by Calculated Risk on 6/18/2025 02:00:00 PM

Fed Chair Powell press conference video here or on YouTube here, starting at 2:30 PM ET.

FOMC Statement:

Although swings in net exports have affected the data, recent indicators suggest that economic activity has continued to expand at a solid pace. The unemployment rate remains low, and labor market conditions remain solid. Inflation remains somewhat elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. Uncertainty about the economic outlook has diminished but remains elevated. The Committee is attentive to the risks to both sides of its dual mandate.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 4-1/4 to 4-1/2 percent. In considering the extent and timing of additional adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage‑backed securities. The Committee is strongly committed to supporting maximum employment and returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Susan M. Collins; Lisa D. Cook; Austan D. Goolsbee; Philip N. Jefferson; Adriana D. Kugler; Alberto G. Musalem; Jeffrey R. Schmid; and Christopher J. Waller.
emphasis added

by Calculated Risk on 6/18/2025 09:11:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.256 million Annual Rate in May

A brief excerpt:

Total housing starts in May were below expectations; however, starts in March and April were revised up, combined.

The third graph shows the month-to-month comparison for total starts between 2024 (blue) and 2025 (red).

Total starts were down 4.6% in May compared to May 2024. Year-to-date (YTD) starts are down 1.5% compared to the same period in 2024. Single family starts are down 7.1% YTD and multi-family up 14.5% YTD.

There is much more in the article.

by Calculated Risk on 6/18/2025 08:32:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in May were at a seasonally adjusted annual rate of 1,256,000. This is 9.8 percent below the revised April estimate of 1,392,000 and is 4.6 percent below the May 2024 rate of 1,316,000. Single-family housing starts in May were at a rate of 924,000; this is 0.4 percent above the revised April figure of 920,000. The May rate for units in buildings with five units or more was 316,000.

Building Permits:
Privately-owned housing units authorized by building permits in May were at a seasonally adjusted annual rate of 1,393,000. This is 2.0 percent below the revised April rate of 1,422,000 and is 1.0 percent below the May 2024 rate of 1,407,000. Single-family authorizations in May were at a rate of 898,000; this is 2.7 percent below the revised April figure of 923,000. Authorizations of units in buildings with five units or more were at a rate of 444,000 in May.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) decreased sharply month-over-month in May.   Multi-family starts were up 4.1% year-over-year.

Single-family starts (red) increased slightly in May and were down 7.3% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery.

Total housing starts in May were below expectations; however, starts in March and April were revised up, combined.

I'll have more later …