by Calculated Risk on 9/14/2025 09:01:00 AM

Most analysts expect the FOMC the reduce the Fed Funds rate by 25bps at the meeting this week, to a target range of 4 to 4 1/4 percent.    Market participants currently expect the FOMC to also cut rates an additional 25bps at both the October and December meetings.

From BofA:

We expect the Fed to cut rates by 25bp to 4.0-4.25% at its September meeting. We look for two changes in the description of current conditions in the first paragraph of the FOMC statement. The reference to swings in net exports should be removed, though some version of the text saying “growth of economic activity moderated in the first half of the year” will probably stay. More importantly, the description of labor market conditions is likely to be downgraded. The FOMC might opt for language similar to last September: “Job gains have slowed, and the unemployment rate has moved up but remains low.”
...
The economic forecasts from the June SEP have aged remarkably well. Growth could get marked up by a tenth for this year, but the out years should stay roughly unchanged. We don’t see any need to tinker with the path of the unemployment rate, since it is on track to reach the Fed’s 4Q projection of 4.5%.
emphasis added

Projections will be released at this meeting. For review, here are the June projections.  

Since the last projections were released, economic growth, the unemployment rate and inflation all have been close to expectations.

The BEA's estimate for first half 2025 GDP showed real growth at 1.4% annualized. Most estimates for Q3 GDP are around 1.7%.  That would put the real growth for the first three quarters at 1.5% annualized - at the top of end of the June projections.  It is possible the FOMC will revise up Q4 2025 GDP growth slightly.

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 4.3% in August.  The unemployment rate will likely increase further this year, and it is possible the FOMC will revise up the Q4 2025 unemployment rate slightly.

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 July 2025, PCE inflation increased 2.6% year-over-year (YoY), unchanged from 2.6% YoY in June. There will likely be some further increases in the 2nd half of 2025, but the forecast range is probably reasonable.

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 to 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 2.9% YoY in July, up from 2.8% YoY in June.  There will likely be further increase in core PCE inflation, but the projections will likely remain mostly the same.

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 to 2.7	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 9/13/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Part 1: Current State of the Housing Market; Overview for mid-September 2025

• Part 2: Current State of the Housing Market; Overview for mid-September 2025

• The "Home ATM" Mostly Closed in Q2

• 1st Look at Local Housing Markets in August

• September ICE Mortgage Monitor: House Prices Up Slightly 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 9/13/2025 08:11:00 AM

The key reports this week are August Retail Sales and Housing Starts.

For manufacturing, August Industrial Production, and the September New York and Philly Fed surveys will be released this week.

The FOMC meets this week and is expected to cut rates.

----- Monday, September 15th -----
8:30 AM ET: The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of 4.0, down from 11.9.

----- Tuesday, September 16th -----
8:30 AM ET: Retail sales for August will be released.  The consensus is for a 0.3% 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).

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

This graph shows industrial production since 1967.

The consensus is for no change in Industrial Production, and for Capacity Utilization to decrease to 77.4%.

10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 33, up from 32 in August. Any number below 50 indicates that more builders view sales conditions as poor than good.

----- Wednesday, September 17th -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:30 AM: Housing Starts for August.

This graph shows single and total housing starts since 1968.

The consensus is for 1.375 million SAAR, down from 1.428 million SAAR.

2:00 PM: FOMC Meeting Announcement. The Fed is expected to cut rates 25bp at this meeting.

2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.

2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.

----- Thursday, September 18th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for initial claims to decrease to 240 thousand from 263 thousand last week.

8:30 AM: the Philly Fed manufacturing survey for September. The consensus is for a reading of 2.5, up from 0.0.

----- Friday, September 19th -----
10:00 AM: State Employment and Unemployment (Monthly) for August 2025

by Calculated Risk on 9/12/2025 03:05:00 PM

Hotel occupancy was weak over the summer months, likely due to less international tourism.  The fall months are mostly domestic travel.

From STR: U.S. hotel results for week ending 6 September

The U.S. hotel industry reported negative year-over-year comparisons, according to CoStar’s latest data through 6 September. ...

31 August through 6 September 2025 (percentage change from comparable week in 2024):

• Occupancy: 57.7% (-0.5%)
• Average daily rate (ADR): US$149.52 (-0.2%)
• Revenue per available room (RevPAR): US$86.20 (-0.7%)
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2025, blue is the median, and dashed light blue is for 2024.  Dashed purple is for 2018, the record year for hotel occupancy. 

The 4-week average of the occupancy rate is tracking behind both last year and the median rate for the period 2000 through 2024 (Blue).

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average will increase during the Fall travel period.

On a year-to-date basis, the only worse years for occupancy over the last 25 years were pandemic or recession years.

by Calculated Risk on 9/12/2025 12:00:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-September 2025

A brief excerpt:

On Wednesday, in Part 1: Current State of the Housing Market; Overview for mid-September 2025 I reviewed home inventory, housing starts and sales. I noted that the key stories this year for existing homes are that inventory increased sharply, and sales are down slightly year-to-date compared to last year (and sales in 2024 were the lowest since 1995). That means prices are under pressure.

In Part 2, I will look at house prices, mortgage rates, rents and more.

As I noted last week, the house price trend suggests house prices will be down year-over-year by the end of 2025. However, there are two new powerful forces pushing in opposite directions - mortgage rates have declined, and unemployment is increasing. Both could impact sales and house prices.

Earlier this week, Cotality’s Chief Economist Dr. Selma Hepp (formerly CoreLogic) wrote: “July’s decline in home prices is atypical — the last two periods where we saw monthly declines in July was in 2022 and during 2006-2008 period …” In 2022, house prices fell briefly as mortgage rates surged higher, and inventory increased sharply. And the 2006-2008 period was the start of the housing bust.
...
The Case-Shiller National Index increased 1.9% year-over-year (YoY) in June and will likely be lower year-over-year in the July report compared to June (based on other data).
...
In the January report, the Case-Shiller National index was up 4.2%, in February up 3.9%, in March up 3.4%, in April report up 2.7%, in May up 2.3% and in June up 1.9%.

And the June Case-Shiller index was a 3-month average of closing prices in April, May and June. April closing prices include some contracts signed in February.

So, not only is this trending down, but there is a significant lag to this data.

There is much more in the article.

by Calculated Risk on 9/12/2025 11:01:00 AM

From BofA:

Since our last weekly publication, 3Q GDP tracking is up a tenth to 1.7% q/q saar and 2Q GDP tracking is unchanged at 3.2%. Here are the details to our tracking changes. [September 12th comment]
emphasis added

From Goldman:

Our Q3 GDP forecast stands at +1.6% (quarter-over-quarter annualized). [September 10th estimate]

And from the Atlanta Fed:

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2025 is 3.1 percent on September 10, up from 3.0 percent on September 4. After recent releases from the US Bureau of Labor Statistics and the US Census Bureau, increases in the nowcasts of real personal consumption expenditures growth and real gross private domestic investment growth from 2.1 percent and 6.0 percent, respectively, to 2.3 percent and 6.2 percent, were partly offset by a decline in the nowcast of the contribution of net exports to GDP growth from 0.28 percentage points to 0.23 percentage points. [September 10th estimate]

by Calculated Risk on 9/12/2025 08:14:00 AM

The BLS reported yesterday:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 2.8 percent over the last 12 months to an index level of 317.306 (1982-84=100). For the month, the index increased 0.3 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 2.8% year-over-year in August (up from 2.5% YoY in July), and although this is early - we need the data for July, August and September - my guess is COLA will probably be around 2.8% 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 9/11/2025 08:00:00 PM

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

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

by Calculated Risk on 9/11/2025 02:46:00 PM

Today, in the Calculated Risk Real Estate Newsletter: The "Home ATM" Mostly Closed in Q2

A brief excerpt:

During the housing bubble, many homeowners borrowed heavily against their perceived home equity - jokingly calling it the “Home ATM” - and this contributed to the subsequent housing bust, since so many homeowners had negative equity in their homes when house prices declined.
...
Here is the quarterly increase in mortgage debt from the Federal Reserve’s Financial Accounts of the United States - Z.1 (sometimes called the Flow of Funds report) released today. In the mid ‘00s, there was a large increase in mortgage debt associated with the housing bubble.

In Q2 2025, mortgage debt increased $108 billion, up from $44 billion in Q1. Note the almost 7 years of declining mortgage debt as distressed sales (foreclosures and short sales) wiped out a significant amount of debt.

However, some of this debt is being used to increase the housing stock (purchase new homes), so this isn’t all Mortgage Equity Withdrawal (MEW).

by Calculated Risk on 9/11/2025 02:00:00 PM

The Federal Reserve released the Q2 2025 Flow of Funds report today: Financial Accounts of the United States.

The net worth of households and nonprofits rose to $176.3 trillion during the second quarter of 2025. The value of directly and indirectly held corporate equities increased $5.5 trillion and the value of real estate increased $1.2 trillion.
...
Household debt increased 3.8 percent at an annual rate in the second quarter of 2025. Consumer credit grew at an annual rate of 2.8 percent, while mortgage debt (excluding charge-offs) grew at an annual rate of 3.3 percent.

Click on graph for larger image.

The first graph shows Households and Nonprofit net worth as a percent of GDP.  

Net worth increased $7.1 trillion in Q2.  As a percent of GDP, net worth increased in Q2 but is still below the peak in 2021.

This includes real estate and financial assets (stocks, bonds, pension reserves, deposits, etc.) net of liabilities (mostly mortgages). Note that this does NOT include public debt obligations.

The second graph shows homeowner percent equity since 1952.

Household percent equity (as measured by the Fed) collapsed when house prices fell sharply in 2007 and 2008.

In Q2 2025, household percent equity (of household real estate) was at 72.6% - up from 72.0% in Q1, 2025

Note: This includes households with no mortgage debt.

The third graph shows household real estate assets and mortgage debt as a percent of GDP.  

Mortgage debt increased by $108 billion in Q2.

Mortgage debt is up $2.88 trillion from the peak during the housing bubble, but, as a percent of GDP is at 44.6% - down from Q1 - and down from a peak of 73.1% of GDP during the housing bust.

The value of real estate, as a percent of GDP, increased in Q2 and is below the recent peak in Q2 2022, but is well above the median of the last 30 years.