by Calculated Risk on 8/11/2025 01:50:00 PM

Back in 2005 I was mostly writing about the housing bubble - and the coming housing bust. But I also mentioned the possibility of a financial crisis. In early 2007, I started forecasting a recession, and by the end of 2007 the housing bust causing a financial crisis was becoming obvious.

Here is an article from the WSJ in 2007 quoting a crazy blogger: How High Will Subprime Losses Go?

Back in the U.S., the Calculated Risk blog sidestepped the colorful language and went straight for the big number: “The losses for the lenders and investors might well be over $1 trillion.”

Many people thought I was crazy. But losses for lenders and financial institutions ended up over $1 trillion.

Then in 2013 I wrote that there will be another crisis someday: "Each new generation of Wall Street wizards figures out a new way to turn lead into gold, and to become wealthy while damaging the financial system. Some of these wizards are probably perfecting their financial alchemy right now."

The key for the "wizards" was to find a way around the regulatory system, and if they could use leverage, the fool's gold would eventually lead to a crisis.

By 2013 the seeds were planted, not by Wall Street wizards, but by Tech Wizards. Now the seeds have taken root (Of course, I'm talking about cryptocurrency, what Charlie Munger called financial "rat poison").

Last year, researchers at the NY Fed looked at the impact of crypto on the financial system: The Financial Stability Implications of Digital Assets. And they concluded: "that, to date, the contribution of digital assets to systemic risk has been limited, given that the digital ecosystem is relatively small and not a major provider of financing and payment services to the real economy."

The key to preventing a financial crisis is to keep the non-regulated (or poorly regulated) areas of finance out of the financial system. A good example is the Tulip Bubble in the 1600s. Some people got rich, others were wiped out, but it had no impact on the financial system.

Unfortunately the current administration has embraced crypto. They are allowing it to creep into the financial system, and allowing 401K plans to hold crypto (aka future bagholders). There has been some discussion of allowing financial institutions to lend against crypto holdings - like for a mortgage.  This is mistake and increases the possibility that crypto will be the source of the next financial crisis.

A final note: CNBC should be embarrassed to have crypto prices on their website. 

by Calculated Risk on 8/11/2025 10:49:00 AM

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

Brief excerpt:

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 1.0% year-over-year in July, down from 1.3% YoY in June.

• Mortgage rates in the high 6% range and improvements in for-sale inventory drove further home price cooling in July

• Annual home price growth eased to +1.0% in July, down from +1.3% in June and +3.6% at the start of the year

• That’s the softest growth rate since 2012, outside of the initial market reaction to mortgage rates pushing above 6% in April and May 2023

• Prices dipped by 0.06% in the month on a seasonally adjusted basis, which is equivalent to a seasonally adjusted annualized rate (SAAR) of -0.7% suggesting more slowing may be on the horizon

• Single family prices were up by +1.4% from the same time last year in July, while condo prices are now down -1.8%, marking the softest condo market since early 2012

• More than half of all major markets are seeing condo prices below last year’s levels, with 9 of the 11 softest condo markets located in Florida, led by Cape Coral (-13.4%) and North Port (-11.2%)

There is much more in the newsletter.

by Calculated Risk on 8/11/2025 08:11:00 AM

Altos reports that active single-family inventory was down 0.8% week-over-week.

Inventory is now up 37.6% from the seasonal bottom in January.   Usually, inventory is up about 21% from the seasonal low by this week in the year.   So, 2025 was a larger than normal increase 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 24.0% compared to the same week in 2024 (last week it was up 26.6%), and down 10.1% compared to the same week in 2019 (last week it was down 10.0%). 

Inventory started 2025 down 22% compared to 2019.  Inventory has closed more than half of that gap, and it appears inventory will be close to 2019 levels at the end of 2025.

This second inventory graph is courtesy of Altos Research.

As of August 8th, inventory was at 859 thousand (7-day average), compared to 866 thousand the prior week. 

Mike Simonsen discusses this data and much more regularly on YouTube

by Calculated Risk on 8/10/2025 06:23:00 PM

Weekend:
• Schedule for Week of August 10, 2025

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 7 and DOW futures are up 54 (fair value).

Oil prices were up over the last week with WTI futures at $63.53 per barrel and Brent at $66.34 per barrel. A year ago, WTI was at $78, and Brent was at $81 - so WTI oil prices are down about 18% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.09 per gallon. A year ago, prices were at $3.42 per gallon, so gasoline prices are down $0.33 year-over-year.

by Calculated Risk on 8/10/2025 08:42:00 AM

The Consumer Price Index for July is scheduled to be released on Tuesday, August 12th. 

The consensus is for a 0.2% increase in CPI, and a 0.3% increase in core CPI. The consensus is for CPI to be up 2.8% year-over-year and core CPI to be up 3.0% YoY.

From Goldman Sachs economists:

We expect a 0.33% increase in July core CPI (vs. +0.3% consensus), corresponding to a year-over-year rate of 3.08% (vs. +3.0% consensus). We expect a 0.27% increase in headline CPI (vs. +0.2% consensus), reflecting higher food prices (+0.3%) but lower energy prices (-0.6%). Our forecast is consistent with a 0.31% increase in core PCE in July.
...
Over the next few months, we expect tariffs to continue to boost monthly inflation and forecast monthly core CPI inflation between 0.3-0.4%. Aside from tariff effects, we expect underlying trend inflation to fall further this year, reflecting shrinking contributions from the housing rental and labor markets.

From BofA:

We forecast headline CPI rose by 0.24% m/m in July, and core CPI increased by 0.31% m/m. If correct, core CPI would increase to 3.1% y/y from 2.9%. Tariffs likely drove an acceleration in goods price hikes despite further declines in vehicle prices. Meanwhile, a rise in airfares should contribute to an uptick in core services ex housing inflation.

Click on graph for larger image.

This graph shows the month-to-month change in both headline and core inflation since January 2024.

The circled area is the change for last July.   CPI was up 0.14% in July 2024, and core CPI was up 0.19%.  So, anything above those readings for July will push up year-over-year inflation.  

Starting this month, the tariff related inflation is expected to kick in.

by Calculated Risk on 8/09/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Q2 NY Fed Report: Mortgage Originations by Credit Score, Foreclosures Decrease

• How Much will the Fannie & Freddie Conforming Loan Limit Change for 2026?

• 1st Look at Local Housing Markets in July

• 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 8/09/2025 08:11:00 AM

The key reports this week are July CPI and Retail Sales.

For manufacturing, the August NY Fed survey, and the July Industrial Production report will be released.

----- Monday, August 11th -----
No major economic releases scheduled.

----- Tuesday, August 12th -----
6:00 AM ET: NFIB Small Business Optimism Index for July.

8:30 AM: The Consumer Price Index for July from the BLS. The consensus is for a 0.2% increase in CPI, and a 0.3% increase in core CPI.  The consensus is for CPI to be up 2.8% year-over-year and core CPI to be up 3.0% YoY.

----- Wednesday, August 13th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

----- Thursday, August 14th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for initial claims to increase to 228 thousand from 226 thousand last week.

8:30 AM: The Producer Price Index for July from the BLS. The consensus is for a 0.2% increase in PPI, and a 0.2% increase in core PPI.

----- Friday, August 15th -----
8:30 AM: Retail sales for July is scheduled to be released.  The consensus is for 0.5% increase 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 New York Fed Empire State manufacturing survey for August. The consensus is for a reading of 0.0, down from 5.5.

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

This graph shows industrial production since 1967.

The consensus is for a 0.2% decrease in Industrial Production, and for Capacity Utilization to be unchanged at 77.6%.

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

by Calculated Risk on 8/08/2025 04:06:00 PM

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

Rail volumes are holding up, indicating goods movement remains resilient despite the headwinds. Looking ahead, though, sustained pressure on labor markets and consumer demand could eventually weigh on freight activity.
emphasis added

U.S. rail intermodal shipments rebounded in July, rising 2.4% over last year and reversing a 2.9% decline in June (intermodal’s first year-over-year decline in 22 months). In July 2025, intermodal originations averaged 270,175 units per week, the second most ever for July (behind July 2018).

Meanwhile, U.S. total carloads rose 4.6% in July 2025 over July 2024, their fifth straight increase. In July, 15 of the 20 carload categories tracked by the AAR saw gains, the most since December 2023. Total carloads averaged 224,568 per week in July 2025, the most for July since 2019. In 2025 through July, total carloads were up 2.8%, or nearly 186,000 carloads, over last year.

by Calculated Risk on 8/08/2025 12:37:00 PM

This is something to watch again. Here is another update on lumber prices.

SPECIAL NOTE: The CME group discontinued the Random Length Lumber Futures contract on May 16, 2023.  I switched to a physically-delivered Lumber Futures contract that was started in August 2022.  Unfortunately, this impacts long term price comparisons since the new contract was priced about 24% higher than the old random length contract for the period when both contracts were available.

This graph shows CME random length framing futures through August 2022 (blue), and the new physically-delivered Lumber Futures (LBR) contract starting in August 2022 (Red).

On August 8, 2025, LBR was at $652.50 per 1,000 board feet, up 24% from a year ago.

Click on graph for larger image.

There is somewhat of a seasonal demand for lumber, and lumber prices frequently peak in the first half of the year.

The pickup in early 2018 was due to the Trump lumber tariffs in 2017.  There were huge increases during the pandemic due to a combination of supply constraints and a pickup in housing starts.  

by Calculated Risk on 8/08/2025 11:41:00 AM

From BofA:

Next week, we will initiate our 3Q GDP tracker ... [August 8th comment]
emphasis added

From Goldman:

[W]e boosted our Q3 GDP tracking estimate by 0.2pp to +1.2% (quarter-over-quarter annualized). Our Q3 domestic final sales estimate stands at -0.1%. [August 7th estimate]

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 2.5 percent on August 7, unchanged from August 5 after rounding. After this morning’s wholesale trade report from the US Census Bureau, the nowcast of the contribution of inventory investment to third-quarter real GDP growth increased from 0.76 percentage points to 0.82 percentage points. [August 7th estimate]