by Calculated Risk on 8/29/2025 09:24:00 AM

Here is a graph of the year-over-year change in shelter from the CPI report and housing from the PCE report this morning, both through July 2025.

CPI Shelter was up 3.7% year-over-year in July, down from 3.8% in June, and down from the cycle peak of 8.2% in March 2023.

Housing (PCE) was up 4.0% YoY in July, down from 4.1% in June and down from the cycle peak of 8.3% in April 2023.

Since asking rents are mostly flat year-over-year, these measures will slowly continue to decline over the next year as rents for existing tenants continue to increase.

The second graph shows PCE prices, Core PCE prices and Core ex-housing over the last 3 months (annualized):

Key measures are above the Fed's target on a 3-month basis. 

3-month annualized change:

PCE Price Index: 2.6%
Core PCE Prices: 3.0%
Core minus Housing: 2.9%

by Calculated Risk on 8/29/2025 08:30:00 AM

From the BEA: Personal Income and Outlays, July 2025

Personal income increased $112.3 billion (0.4 percent at a monthly rate) in July, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI)—personal income less personal current taxes—increased $93.9 billion (0.4 percent) and personal consumption expenditures (PCE) increased $108.9 billion (0.5 percent).

Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—increased $110.9 billion in July. Personal saving was $985.6 billion in July and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.4 percent.

From the preceding month, the PCE price index for July increased 0.2 percent. Excluding food and energy, the PCE price index increased 0.3 percent.

From the same month one year ago, the PCE price index for July increased 2.6 percent. Excluding food and energy, the PCE price index increased 2.9 percent from one year ago.
emphasis added

The July PCE price index increased 2.6 percent year-over-year (YoY), unchanged from 2.6 percent YoY in June.

The PCE price index, excluding food and energy, increased 2.9 percent YoY, up from 2.8 percent in June.

The following graph shows real Personal Consumption Expenditures (PCE) through July 2025 (2017 dollars). Note that the y-axis doesn't start at zero to better show the change.

Click on graph for larger image.

The dashed red lines are the quarterly levels for real PCE.

Personal income and PCE were at expectations.

Inflation was at expectations.

by Calculated Risk on 8/28/2025 07:47:00 PM

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

Friday:
• At 8:30 AM ET, Personal Income and Outlays, July 2025. The consensus is for a 0.4% increase in personal income, and for a 0.5% increase in personal spending. And for the Core PCE price index to increase 0.3%.  PCE prices are expected to be up 2.6% YoY, and core PCE prices up 2.9% YoY.

• At 9:45 AM, Chicago Purchasing Managers Index for August.

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

by Calculated Risk on 8/28/2025 04:48:00 PM

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

Excerpt:

Freddie Mac reported that the Single-Family serious delinquency rate in July was 0.55%, unchanged from 0.55% June. Freddie's rate is up year-over-year from 0.51% in July 2024, however, this is below the pre-pandemic level of 0.60%.

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 July was 0.53%, unchanged from 0.53% in June. The serious delinquency rate is up year-over-year from 0.49% in July 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 8/28/2025 12:20:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 2.5% Below 2022 Peak

Excerpt:

It has been 19 years since the housing bubble peak, ancient history for many readers!

In the June Case-Shiller house price index released Tuesday, the seasonally adjusted National Index (SA), was reported as being 77% above the bubble peak. However, in real terms, the National index (SA) is about 10.0% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 1.4% above the bubble peak.

People usually graph nominal house prices, but it is also important to look at prices in real terms. As an example, if a house price was $300,000 in January 2010, the price would be $443,000 today adjusted for inflation (48% increase). That is why the second graph below is important - this shows "real" prices.

The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 2.5% below the recent peak, and the Composite 20 index is 2.7% below the recent peak in 2022.

Both the real National index and the Comp-20 index decreased in June.

It has now been 37 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory)

There is much more in the article!

by Calculated Risk on 8/28/2025 10:00:00 AM

From the NAR: NAR Pending Home Sales Report Shows 0.4% Decrease in July

Pending home sales decreased by 0.4% in July from the prior month and rose 0.7% year-over-year, according to the National Association of REALTORS® Pending Home Sales report. ...

Month-Over-Month
0.4% decrease in pending home sales
Declines in the Midwest and Northeast; essentially flat in the South; gains in the West

Year-Over-Year
0.7% increase in pending home sales
Increase in Midwest and South; decline in Northeast and West
emphasis added

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in August and September.

by Calculated Risk on 8/28/2025 08:35:00 AM

From the BEA: Gross Domestic Product, 2nd Quarter 2025 (Second Estimate) and Corporate Profits (Preliminary)

Real gross domestic product (GDP) increased at an annual rate of 3.3 percent in the second quarter of 2025 (April, May, and June), according to the second estimate released by the U.S. Bureau of Economic Analysis. In the first quarter, real GDP decreased 0.5 percent.

The increase in real GDP in the second quarter primarily reflected a decrease in imports, which are a subtraction in the calculation of GDP, and an increase in consumer spending. These movements were partly offset by decreases in investment and exports.

Real GDP was revised up 0.3 percentage point from the advance estimate, primarily reflecting upward revisions to investment and consumer spending that were partly offset by a downward revision to government spending and an upward revision to imports.
emphasis added

Here is a Comparison of Second and Advance Estimates. PCE growth was revised up from 1.4% to 1.6%. Residential investment was revised down from -4.6% to -4.7%.

by Calculated Risk on 8/28/2025 08:30:00 AM

The DOL reported:

In the week ending August 23, the advance figure for seasonally adjusted initial claims was 229,000, a decrease of 5,000 from the previous week's revised level. The previous week's level was revised down by 1,000 from 235,000 to 234,000. The 4-week moving average was 228,500, an increase of 2,500 from the previous week's revised average. The previous week's average was revised down by 250 from 226,250 to 226,000.
emphasis added

The following graph shows the 4-week moving average of weekly claims since 1971.

Click on graph for larger image.

The dashed line on the graph is the current 4-week average. The four-week average of weekly unemployment claims increased to 228,500.

The previous week was revised down.

Weekly claims were below the consensus forecast.

by Calculated Risk on 8/27/2025 07:53:00 PM

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

Thursday:
• At 8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for initial claims to increase to 236 thousand from 235 thousand last week.

• Also at 8:30 AM: Gross Domestic Product, 2nd Quarter 2025 (Second Estimate) and Corporate Profits (Preliminary). The consensus is that real GDP increased 3.0% annualized in Q1, unchanged from the advance estimate.

• At 10:00 AM: Pending Home Sales Index for July.  The consensus is for a 0.3% increase in this index.

• At 11:00 AM: the Kansas City Fed manufacturing survey for August. This is the last of the regional Fed manufacturing surveys for August.

by Calculated Risk on 8/27/2025 01:16:00 PM

Two weeks ago I wrote The Next Financial Crisis. I noted:

The key to preventing a financial crisis is to keep the non-regulated (or poorly regulated) areas of finance out of the financial system.

Currently the most obvious non-regulated area of finance is cryptocurrency. And that leaves us with two choices to prevent this "financial rat poison" from leading to another financial crisis:

1. Keep crypto out of the financial system, or

2. Regulate crypto.

Keeping crypto out of the financial system could range from banning it outright, to just prohibiting financial institutions from holding or lending against crypto holdings (including mortgage lending). Unfortunately, the current administration has embraced crypto.

Regulation is the alternative. If crypto is an "asset", then it should be registered with the SEC (with quarterly filings). If it is a currency, the issuer should also be required to register with the SEC and provide quarterly updates on the amount in circulation, the mechanics of the scheme, and list all the backing assets. Then lenders could be allowed to the lend up to a percent of the backing assets.

For example, for Bitcoin, the original issuer should file quarterly with the SEC. If the backing assets amount to $0.01 per coin (just a guess), then lenders could lend up to a percentage of $0.01 for each Bitcoin.

These are the two choices to avoid a financial crisis.