by Calculated Risk on 8/12/2025 12:03:00 PM

The BLS reported earlier today:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.5 percent over the last 12 months to an index level of 316.349 (1982-84=100). For the month, the index increased 0.1 percent prior to seasonal adjustment.

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U and is not seasonally adjusted (NSA).

• In 2024, the Q3 average of CPI-W was 308.729.

The 2024 Q3 average was the highest Q3 average, so we only have to compare Q3 this year to last year.

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled is for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 2.5% year-over-year in July (down from 2.6% YoY in June), and although this is early - we need the data for July, August and September - my early guess is COLA will probably be close to 3% this year, up from 2.5% in 2025.

Contribution and Benefit Base

The contribution base will be adjusted using the National Average Wage Index. This is based on a one-year lag. The National Average Wage Index is not available for 2024 yet, although we know wages increased solidly in 2024. If wages increased 5% in 2024, then the contribution base next year will increase to around $185,000 in 2026, from the current $176,100.

Remember - this is an early look. What matters is average CPI-W, NSA, for all three months in Q3 (July, August and September).

by Calculated Risk on 8/12/2025 08:51:00 AM

Here are a few measures of inflation:

The first graph is the one Fed Chair Powell had mentioned two years ago as something to watch.  

Click on graph for larger image.

This graph shows the YoY price change for Services and Services less rent of shelter through July 2025.

Services were up 4.0% YoY as of July 2025, up from 3.8% YoY in June.

Services less rent of shelter was up 3.8% YoY in July, unchanged from 3.8% YoY the previous month.

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 up 1.2% YoY as of July 2025, up from 0.6% YoY the previous month.

Commodities less food and energy commodities were at 1.1% YoY in July, up from 0.6% YoY the previous month.

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

Shelter was up 3.7% year-over-year in July, down from 3.8% in June. Housing (PCE) was up 4.1% YoY in June, unchanged from 4.1% in May.

This is still catching up with private new lease data (this includes renewals whereas private data is mostly for new leases).

Core CPI ex-shelter was up 2.5% YoY in July, up from 2.1% YoY in June.

by Calculated Risk on 8/12/2025 08:30:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.2 percent on a seasonally adjusted basis in July, after rising 0.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 2.7 percent before seasonal adjustment.

The index for shelter rose 0.2 percent in July and was the primary factor in the all items monthly increase. The food index was unchanged over the month as the food away from home index rose 0.3 percent while the food at home index fell 0.1 percent. In contrast, the index for energy fell 1.1 percent in July as the index for gasoline decreased 2.2 percent over the month.

The index for all items less food and energy rose 0.3 percent in July, following a 0.2-percent increase in June. Indexes that increased over the month include medical care, airline fares, recreation, household furnishings and operations, and used cars and trucks. The indexes for lodging away from home and communication were among the few major indexes that decreased in July.

The all items index rose 2.7 percent for the 12 months ending July, after rising 2.7 percent over the 12 months ending June. The all items less food and energy index rose 3.1 percent over the last 12 months. The energy index decreased 1.6 percent for the 12 months ending July. The food index increased 2.9 percent over the last year.
emphasis added

The change in core CPI was above expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.

by Calculated Risk on 8/11/2025 07:54:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Steady Ahead of High Stakes Inflation Report

The average top tier 30yr fixed rate held exceptionally steady last week after moving just a bit lower over the weekend. By comparison, today's rates are much closer to Friday's latest levels and still very close to the lowest we've seen since October, 2024.

If the two key economic considerations for interest rates are jobs and inflation, the two key economic reports are the jobs report seen earlier this month and the Consumer Price Index which comes out tomorrow morning. It's often repeated that the PCE Price Index is a preferable gauge of inflation, but CPI comes out 2 weeks earlier and thus gets most of the market's attention.

Just like last month, market participants are watching to see the extent of tariff-driven inflation in tomorrow's data. If it contributes to a higher-than-expected result, we'll likely see some upward pressure on rates. [30 year fixed 6.58%]
emphasis added

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

• At 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.

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.