by Calculated Risk on 9/16/2025 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 32, unchanged from 32 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Steady but Future Sales Expectations Hit Six-Month High

Builder sentiment levels remained unchanged in September but lower mortgage rates and expectations that the Federal Reserve will soon cut the federal funds rate led to higher future sale expectations in the coming months.

Builder confidence in the market for newly built single-family homes was 32 in September, unchanged from the August reading, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today. While builder sentiment has hovered at a relatively low reading between 32 and 34 since May, builders expressed optimism that a more favorable interest rate climate could bring hesitant buyers off the sidelines in the final quarter of 2025.

“While builders continue to contend with rising construction costs, a recent drop in mortgage interest rates over the past month should help spur housing demand,” said NAHB Chairman Buddy Hughes, a home builder and developer from Lexington, N.C.

“NAHB expects the Fed to cut the federal funds rate at their meeting this week, which will help lower interest rates for builder and developer loans,” said NAHB Chief Economist Robert Dietz. “Moreover, the 30-year fixed rate mortgage average is down 23 basis points over the past four weeks to 6.35%, per Freddie Mac. This is the lowest level since mid-October of last year and a positive sign for future housing demand.”

In a sign that the housing market remains soft, the latest HMI survey also revealed that 39% of builders reported cutting prices in September, up from 37% in August and the highest percentage in the post-Covid period. Meanwhile, the average price reduction was 5% in September, the same as it’s been every month since last November. The use of sales incentives was 65% in September, essentially unchanged from 66% in August.
...
The HMI index gauging future sales expectations in September rose two points to 45, the highest reading since March of this year. The component measuring current sales conditions held steady at 34 while the gauge charting traffic of prospective buyers posted a one-point decline to 21.

Looking at the three-month moving averages for regional HMI scores, the Northeast was unchanged at 44, the Midwest gained one point to 42, the South held steady at 29 and the West increased one point to 26.
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was below the consensus forecast.

by Calculated Risk on 9/16/2025 09:15:00 AM

From the Fed: Industrial Production and Capacity Utilization

Industrial production (IP) ticked up 0.1 percent in August after decreasing 0.4 percent in July. Manufacturing output rose 0.2 percent in August after edging down 0.1 percent in July. Within manufacturing, the production of motor vehicles and parts increased 2.6 percent in August, while factory output elsewhere edged up 0.1 percent. The index for mining moved up 0.9 percent, and the index for utilities decreased 2.0 percent. At 103.9 percent of its 2017 average, total IP in August was 0.9 percent above its year-earlier level. Capacity utilization maintained the same rate of 77.4 percent in August, a rate that is 2.2 percentage points below its long-run (1972–2024) average.
emphasis added

Click on graph for larger image.

This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and close to the level in February 2020 (pre-pandemic).

Capacity utilization at 77.4% is 2.2% below the average from 1972 to 2023.  This was at consensus expectations.

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

The second graph shows industrial production since 1967.

Industrial production increased to 103.9. This is above the pre-pandemic level.

Industrial production was slightly below consensus expectations (with revisions).

by Calculated Risk on 9/16/2025 08:30:00 AM

On a monthly basis, retail sales increased 0.6% from July to August (seasonally adjusted), and sales were up 5.0 percent from August 2024.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for August 2025, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $732.0 billion, up 0.6 percent from the previous month, and up 5.0 percent from August 2024. ... The June 2025 to July 2025 percent change was revised from up 0.5 percent to up 0.6 percent.
emphasis added

Click on graph for larger image.

This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).

Retail sales ex-gasoline was up 0.6% in August.

The second graph shows the year-over-year change in retail sales and food service (ex-gasoline) since 1993.

Retail and Food service sales, ex-gasoline, increased by 5.4% on a YoY basis.

The change in sales in August were above expectations and the previous two months were revised up.

by Calculated Risk on 9/15/2025 07:53:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Week at Another Long-Term Low

Mortgage rates have done almost nothing but move lower over the past 4 months. The first Fridays in August and September account for about half of the total drop thanks to weaker results in the jobs report.

Since the September 5th jobs report, rates have held a sideways-to-slightly lower range that's resulted in several additional "lowest since" headlines. There's nothing special about today in that regard. Bonds (which dictate rates) happened to improve, so rates inched to another 11+ month low.

Today's levels aren't appreciably different than last Friday's. Volatility is a bigger risk over the next two days thanks to economic data tomorrow morning and the Fed announcement on Wednesday. [30 year fixed 6.25%]
emphasis added

Tuesday:
• At 8:30 AM ET, Retail sales for August will be released.  The consensus is for a 0.3% increase in retail sales.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for August. The consensus is for no change in Industrial Production, and for Capacity Utilization to decrease to 77.4%.

• At 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.

by Calculated Risk on 9/15/2025 02:41:00 PM

With unemployment increasing, but not quite recessionary, I'm reminded of a post I wrote in May 2011: Employment: A dirty little secret

[I]t really isn't much of a secret that Wall Street and corporate America like the unemployment rate to be a little high. But it is "dirty" in the sense that it is unspoken. Higher unemployment keeps wage growth down, and helps with margins and earnings - and higher unemployment also keeps the Fed on the sidelines. Yes, corporations like to see job growth, so people have enough confidence to spend (and they can have a few more customers). And they definitely don't want to see Depression era unemployment - but a slowly declining unemployment rate (even at 9%) with some job growth is considered OK.

And from others, like Kash Mansori, also in 2011: Why a Bad Job Market is Good News for Some

[T]his opens up an interesting line of reasoning, one that is certainly not new but which this data reminds us of. If a bad labor market means that workers get a smaller share of the productivity they bring to their employers, then the owners of companies will have a strong preference for a weak labor market. Firms don't like recessions, of course -- it's hard to make money when your sales are falling. But companies do enjoy the way that a very slow recovery in the job market can allow them to keep wages down, and thus keep a larger share of the output of their workers for themselves.

And from Paul Krugman in 2013: The Plight of the Employed

And may I suggest that employers, although they’ll never say so in public, like this situation? That is, there’s a significant upside to them from the still-weak economy. I don’t think I’d go so far as to say that there’s a deliberate effort to keep the economy weak; but corporate America certainly isn’t feeling much pain, and the plight of workers is actually a plus from their point of view.

Back then we had high, but a slowly declining unemployment rate. Now we have a low but slowly increasing unemployment rate. This is bad news for those losing their jobs, or those looking for jobs, or on the cusp of becoming unemployed. But this is a positive for corporate America (as long as we avoid a recession).

by Calculated Risk on 9/15/2025 10:43:00 AM

Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in August

A brief excerpt:

Tracking local data gives an early look at what happened the previous month and also reveals regional differences in both sales and inventory.

August sales will be mostly for contracts signed in June and July, and mortgage rates averaged 6.82% in June and 6.72% in July (somewhat lower than for closed sales in July).

In August, sales in these early reporting markets were down 5.0% YoY. Last month, in July, these same markets were up 0.5% year-over-year Not Seasonally Adjusted (NSA).

Important: There were one fewer working days in August 2025 (21) as in August 2024 (22). So, the year-over-year change in the headline SA data will be more than the NSA data (there are other seasonal factors).
...
Many more local markets to come!

There is much more in the article.

by Calculated Risk on 9/15/2025 08:11:00 AM

Altos reports that active single-family inventory was up 1.6% week-over-week.  Inventory usually starts to decline in the fall and then declines sharply during the holiday season.

Inventory is now up 37.8% from the seasonal bottom in January.   Usually, inventory is up about 20.5% from the seasonal low by this week in the year.   So, 2025 saw 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 20.5% compared to the same week in 2024 (last week it was up 20.4%), and down 9.8% compared to the same week in 2019 (last week it was down 10.6%). 

Inventory started 2025 down 22% compared to 2019.  Inventory has closed some of that gap, but it appears inventory will still be below 2019 levels at the end of 2025.

This second inventory graph is courtesy of Altos Research.

As of September 12th, inventory was at 860 thousand (7-day average), compared to 847 thousand the prior week. 

Mike Simonsen discusses this data and much more regularly on YouTube

by Calculated Risk on 9/14/2025 09:29:00 PM

Weekend:
• Schedule for Week of September 14, 2025

• FOMC Preview: 25bps Rate Cut Expected

Monday:
• At 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.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 9 and DOW futures are up 82 (fair value).

Oil prices were up over the last week with WTI futures at $62.93 per barrel and Brent at $67.21 per barrel. A year ago, WTI was at $70, and Brent was at $74 - so WTI oil prices are down about 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.12 per gallon. A year ago, prices were at $3.15 per gallon, so gasoline prices are down $0.03 year-over-year.

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.