by Calculated Risk on 10/20/2025 07:13:00 PM

From Matthew Graham at Mortgage News Daily: Another Boring Day With Mortgage Rates Near 3-Year Lows

[W]e're hanging out near 3 year lows with minimal volatility. In order to see sharper, more sustained momentum, we'd likely need the government shutdown to end. That would allow the most consequential economic reports (like the jobs report) to be released. It would also allow data collection to resume for future jobs reports.

Between now and then, there is other data to guide the rate market, but it's just not as heavy hitting. This week is particularly light in that regard, but there's one exception. The BLS received an exception to compile September's CPI inflation data, to be released this Friday. It's not quite on par with the jobs report, but it can certainly get rates moving (for better or worse, depending on the details). [30 year fixed 6.22%]
emphasis added

Tuesday:
• No major economic releases scheduled.

by Calculated Risk on 10/20/2025 01:43:00 PM

Today, in the Calculated Risk Real Estate Newsletter: California Home Sales Up 6.6% Year-over-year SAAR in September

A brief excerpt:

The NAR is scheduled to release September Existing Home sales on Thursday, October 24th at 10:00 AM. The consensus is for the NAR to report sales of 4.06 million SAAR. Last year, the NAR reported sales in September 2024 at 3.90 million SAAR.

California reports Seasonally Adjusted (SA) sales and some measures of inventory whereas most of the local is Not Seasonally Adjusted (NSA).

From the California Association of Realtors® (C.A.R.): California home sales rebound in September with modest monthly and annual gains, C.A.R. says

After five consecutive months of year-over-year declines, September home sales activity climbed 5 percent from the 264,240 homes sold in August and rose 6.6 percent from a year ago, when 260,340 homes were sold on an annualized basis. September marked the 36th straight month in which the seasonally adjusted sales rate remained below the 300,000 benchmark. ...

This is in line with national sales being up year-over-year.

There is much more in the article.

by Calculated Risk on 10/20/2025 11:36:00 AM

Altos reports that active single-family inventory was up 0.3% week-over-week.  Inventory usually starts to decline in the fall and then declines sharply during the holiday season.

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 16.1% compared to the same week in 2024 (last week it was up 17.0%), and down 8.1% compared to the same week in 2019 (last week it was down 9.5%). 

Inventory started 2025 down 22% compared to 2019.  Inventory has closed more than half 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 October 17th, inventory was at 859 thousand (7-day average), compared to 857 thousand the prior week. 

Mike Simonsen discusses this data and much more regularly on YouTube

by Calculated Risk on 10/19/2025 08:16:00 AM

Note: CR is on vacation until Oct 21st.

This is the 21st year I've been writing this blog!

Starting in January 2005, I was very bearish on housing - and in early 2007, I predicted a recession.

However in 2009 I became more optimistic. For example, in February 2009, I wrote: Looking for the Sun (Note: that post shocked many readers since I had been very bearish).

A few years later, in early 2012, when many people were still bearish on housing, I called the bottom for housing: The Housing Bottom is Here

Then I spent a number of years arguing against the recession callers, and the new housing bubble calls. A few examples:

In 2015, I wrote The Endless Parade of Recession Calls

For the last 6+ years, there have been an endless parade of incorrect recession calls. The most reported was probably the multiple recession calls from ECRI in 2011 and 2012.
...
I disagreed with that call in 2011; I wasn't even on recession watch!

And I updated that post several times.

And on housing, over seven years ago, in January 2018, I was quoted in a Bloomberg article:

Bill McBride, who runs the Calculated Risk blog and also called the crash, doesn’t think home prices are inflated this time around. Unlike in 2005, lenders are acting responsibly and the Wild West of real estate speculation hasn’t returned, he said. There is less to speculate on, too. Compared with the overbuilding that preceded the bust, today’s pace of construction isn’t fast enough, he said.

“Lending standards are still pretty good,” McBride said, and he doesn’t expect mortgage rates to “take off” in the short term.

And in December 2018, I disagreed with Professor Shiller A comment on Professor Shiller's "The Housing Boom Is Already Gigantic. How Long Can It Last?". My conclusion:

No big deal, and definitely not a "gigantic" boom in house prices.

In 2021, I wrote: Is there a New Housing Bubble?

The lack of wild speculation doesn't mean house prices can't decline, but it means that we won't see cascading declines in prices like what happened when the housing bubble burst.
...
From a historical perspective, house prices are high. But lending standards have been solid, and we haven't seen significant speculation - so I wouldn't call this a bubble.

Also in 2021, I started my real estate newsletter.  

Note: for $25 you can read the entire archive and one month of daily posts - but make sure you cancel or substack will bill you every month! For $100, you will usually receive 4 to 6 articles per week for a year, you can read the archive and comment on all the posts.

A few key articles:

Housing and Demographics: The Next Big Shift

Housing: Don't Compare the Current Housing Boom to the Bubble and Bust

Household Formation Drives Housing Demand

The Long-Term Housing and Population Shift

Stay tuned!

by Calculated Risk on 10/18/2025 08:11:00 AM

NOTE: I'm on vacation and returning this week. Government data might be rescheduled due to the government shutdown.

The key economic report this week is September Existing Home sales.

For manufacturing, the Kansas City Fed manufacturing survey will be released this week.

----- Monday, October 20th -----
No major economic releases scheduled.

----- Tuesday, October 21st -----
No major economic releases scheduled.

----- Wednesday, October 22nd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

During the day: The AIA/Deltek's Architecture Billings Index for September (a leading indicator for commercial real estate).

----- Thursday, October 23rd -----
8:30 AM: The initial weekly unemployment claims report will be released. 

8:30 AM ET: Chicago Fed National Activity Index for September. This is a composite index of other data.

10:00 AM: Existing Home Sales for September from the National Association of Realtors (NAR).  

The graph shows existing home sales from 1994 through the report last month.

11:00 AM: Kansas City Fed Survey of Manufacturing Activity for October.

----- Friday, October 24th -----
8:30 AM: CPI.

by Calculated Risk on 10/17/2025 08:11:00 AM

From March 2013: Business Cycles and Markets

I've been asked several times about the recent ECRI recession call (obviously I disagreed with their incorrect recession call in 2011 - I wasn't even on recession watch then and I'm not on recession watch now - and I also think ECRI is wrong about a recession starting in mid-2012). ...

It seems to me ECRI is trying to make this an academic exercise and hoping for some significant downward revisions. Right now the data doesn't indicate a recession in 2012, but, as Menzie Chinn notes, "all of these series will be revised, so one wouldn’t want to state definitively we are not in a recession – therein lies the path to embarrassment. But the case still has to be made for recession."

But why do we care? ...

Why is there so much focus on the business cycle? For companies, especially cyclical companies, the reason is obvious – it helps with planning, staffing and investment.

But why are investors so focused on the business cycle? Obviously earnings decline in a recession, and stock prices fall too. The following graph shows the year-over-year (YoY) change in the S&P 500 (using average monthly prices) since 1970. Notice that the market usually declines YoY in a recession.
...
So calling a recession isn’t just an academic exercise, there is some opportunity to preserve capital.

Note: From June 2015: ECRI Admits Incorrect Recession Call

CR Note: I will be returning on October 21st (unless I change my mind or get lost), and I should start posting soon. Best to all!

by Calculated Risk on 10/16/2025 08:11:00 AM

Note: CR is on vacation, and I will return on October 21st.

In 2005 and 2006, I was researching previous housing bubble / busts to try to predict what would happen following the bursting of the housing bubble.

So, in April 2008, when many pundits were calling the housing bottom, I wrote: Housing Bust Duration

After another year (or two) of rapidly falling prices, it's very likely that real prices will continue to fall - but at a slower pace. During the last few years of the bust, real prices will be flat or decline slowly - and the conventional wisdom will be that homes are a poor investment.

The Los Angeles bust took 86 months in real terms from peak to trough (about 7 years) using the Case-Shiller index. If the Composite 20 bust takes a similar amount of time, the real price bottom will happen in early 2013 or so.

And then in February 2012 I wrote: The Housing Bottom is Here

There are several reasons I think that house prices are close to a bottom. First prices are close to normal looking at the price-to-rent ratio and real prices (especially if prices fall another 4% to 5% NSA between the November Case-Shiller report and the March report). Second the large decline in listed inventory means less downward pressure on house prices, and third, I think that several policy initiatives will lessen the pressure from distressed sales (the probable mortgage settlement, the HARP refinance program, and more).

And in March 2013, I wrote about the two bottoms - one for activity and the other for prices: Housing: The Two Bottoms

I pointed out there are usually two bottoms for housing: the first for new home sales, housing starts and residential investment, and the second bottom is for house prices.
...
[I]t appears activity bottomed in 2009 through 2011 (depending on the measure) and house prices bottomed in early 2012.

by Calculated Risk on 10/15/2025 08:11:00 AM

Note: CR is on vacation, and I will return on October 21st.

In early 2009, many analysts were predicting the 2nd Great Depression. However I started seeing some positive signs ... and I was able to call the end of the recession in mid-2009.

From January 2009: Vehicle Sales

David Rosenberg at Merrill Lynch wrote a research piece last week: "Not Your Father’s Recession ...(But Maybe Your Grandfather’s)" (no link)

Needless to say, the piece wasn't too upbeat.

But I was intrigued by some of the comments on vehicle sales.
...
Currently this ratio is at 23.9 years, the highest ever. This is an unsustainable level (I doubt most vehicles will last 24 years!), and the ratio will probably decline over the next few years. This could happen with vehicles being removed from the fleet, but more likely because of a sales increase.
...
Sales won't increase right away (look at the depressed sales during the early '80s), but this does suggest that auto sales are closer to the bottom than the top, and that auto sales will increase significantly in the future - although sales in 2009 will probably be dismal.

And from February 2009: Looking for the Sun

2009 will be a grim economic year. The unemployment rate will rise all year, house prices will fall, commercial real estate (CRE) will get crushed ... but there might be a few rays of sunshine too.
...
Even though most of the economic news will be ugly in 2009, my guess is all three of these series will find a bottom (or at least the pace of decline will slow significantly). This means that the drag on employment in these industries, and the drag on GDP, will slow or stop.

These will be rays of sunshine in a very dark season. That doesn't mean a thaw, but it will be a beginning ...

CR Note: I do not have a crystal ball, but I was looking past the horrible day-to-day numbers and starting to see the end of the recession.

by Calculated Risk on 10/14/2025 04:56:00 PM

Note: CR is on vacation, and I will return on October 21st.

In December 2007, most analysts were still dramitically underestimating the probably losses for lenders and financial institutions.

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

The global race is on to find the best phrase to describe the housing and credit mess. The U.K.’s Telegraph quotes an economist who says it “could make 1929 look like a walk in the park” if central banks don’t solve the crisis in a matter of weeks.

The report cites the recent prediction from Barclays Capital that losses from the subprime-mortgage meltdown could hit $700 billion. That would top Merrill Lynch’s recent estimate of $500 billion. The Australian newspaper notes that a $700 billion “bloodbath” — potentially leading the U.S. economy into “the blackest year since the Great Depression” — would top the GDPs of all but 15 nations.

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.

And if you look at the post the WSJ referenced, the first paragraph starts: "Within the next couple of years, probably somewhere between 10 million and 20 million U.S. homeowners will owe more on their homes, than their homes are worth."

I was a grizzly bear!

by Calculated Risk on 10/13/2025 08:11:00 AM

CR Note: On vacation. I will return on October 21st (If I don't get lost!)

In December 2006, my friend Doris "Tanta" Dungey started writing for Calculated Risk.

From December 2006, until she passed away from ovarian cancer on Nov 30, 2008, Tanta was my co-blogger. Tanta worked as a mortgage banker for 20 years, and we started chatting in early 2005 about the housing bubble and the changes in lending practices. In 2006, Tanta was diagnosed with late stage cancer, and she took an extended medical leave while undergoing treatment. While on medical leave she wrote for this blog, and her writings received widespread attention and acclaim.

If you want to understand the mortgage industry, read Tanta's posts (here is The Compleat UberNerd and a Compendium of Tanta's Posts).

As an example, here is a brief excerpt from Foreclosure Sales and REO For UberNerds

The following is not an exhaustive discussion of all of the issues involved in foreclosures and REO. It’s a start at unpacking some of the concepts and definitions. We have been seeing, and are going to continue to see, a lot of information presented on foreclosure sales, REO sales, and their impacts on existing home transaction volumes and prices in various market areas. As always with “UberNerd” posts, this is long and excruciating. Proceed with typical motivation as you may consider your own best interest in an open market in blog postings.

And an excerpts from Mortgage Servicing for UberNerds

StillLearning asked in the comments about mortgage servicing, and since y’all are nerds, not dummies, here’s my highly-selective occasionally-oversimplified summary for you that skips the boring parts like how your check gets out of the “lockbox” and that stuff. We can discuss extra-credit issues like “excess servicing” and “subservicing” and “SFAS 144 meets MSR” and “negative convexity” and other kinds of inside baseball in the comments. There is a lot that can be said about loan servicing, but let’s start with the basics:

Servicers have two major types of servicing portfolio: loans they service for themselves and loans they service for other investors. In accounting terms, the “compensation” is the same, meaning that even if you are the noteholder, you pay yourself to service the loans in the same way that an outside investor would pay you, and it shows on the books that way. The differences in compensation stem from the basic fact that one is generally more motivated to do a good job servicing (particularly collecting and efficiently liquidating REO) for one’s own investment than for someone else’s.

Also see In Memoriam: Doris "Tanta" Dungey for photos, links to obituaries in the NY Times, Washington Post and much more.