In Depth Analysis: CalculatedRisk Newsletter on Real Estate (Ad Free) Read it here.

Monday, May 05, 2025

ISM® Services Index Increased to 51.6% in April

by Calculated Risk on 5/05/2025 10:00:00 AM

(Posted with permission). The ISM® Services index was at 51.6%, up from 50.8% last month. The employment index increased to 49.0%, from 46.2%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 51.6% April 2025 Services ISM® Report On Business®

Economic activity in the services sector expanded for the 10th consecutive month in April, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 51.6 percent, indicating expansion for the 56th time in 59 months since recovery from the coronavirus pandemic-induced recession began in June 2020.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In April, the Services PMI® registered 51.6 percent, 0.8 percentage point higher than the March figure of 50.8 percent. The Business Activity Index registered 53.7 percent in April, 2.2 percentage points lower than the 55.9 percent recorded in March. This is the index’s 59th consecutive month of expansion. The New Orders Index recorded a reading of 52.3 percent in April, 1.9 percentage points higher than the March figure of 50.4 percent. The Employment Index stayed in contraction territory for the second month in a row; the reading of 49 percent is a 2.8-percentage point increase compared to the 46.2 percent recorded in March.

“The Supplier Deliveries Index registered 51.3 percent, 0.7 percentage point higher than the 50.6 percent recorded in March. This is the fifth consecutive month that the index has been in expansion territory, indicating slower supplier delivery performance. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

The Prices Index registered 65.1 percent in April, a 4.2-percentage point increase from March’s reading of 60.9 percent and a fifth consecutive reading above 60 percent. The Inventories Index registered its third consecutive month in expansion territory in April, registering 53.4 percent, an increase of 3.1 percentage points from March’s figure of 50.3 percent. The Inventory Sentiment Index expanded for the 24th consecutive month, registering 56.1 percent, down 0.5 percentage point from March’s reading of 56.6 percent. The Backlog of Orders Index registered 48 percent in April, a 0.6-percentage point increase from the March figure of 47.4 percent, indicating contraction for the eighth time in the last nine months.

“Eleven industries reported growth in April, a drop of three from the 14 industries reported in January and February. The Services PMI® has expanded in 55 of the last 58 months dating back to June 2020. The April reading of 51.6 percent is 1 percentage point below the 12-month average reading of 52.6 percent.”

Miller continues, “April’s change in indexes was a reversal of March’s direction, with increases in three (New Orders, Employment and Supplier Deliveries) of the four subindexes that directly factor into the Services PMI®. Of those four, only the Business Activity Index had a lower reading compared to March. Employment continues to be the only one of these subindexes in contraction territory, with two straight months of contraction. From December through February, all four subindexes were in expansion. Regarding tariffs, respondents cited actual pricing impacts as concerns, more so than uncertainty and future pressures. Respondents continue to mention federal agency budget cuts as a drag on business, but overall, results are improving.”
emphasis added
This was below consensus expectations.

Housing May 4th Weekly Update: Inventory up 2.1% Week-over-week, Up 32.9% Year-over-year

by Calculated Risk on 5/05/2025 08:11:00 AM

Altos reports that active single-family inventory was up 2.1% week-over-week.

Inventory is now up 19.2% from the seasonal bottom in January and is increasing.  

Usually, inventory is up about 10% from the seasonal low by this week in the year.   So, 2025 is seeing a larger than normal pickup in inventory.

The first graph shows the seasonal pattern for active single-family inventory since 2015.

Altos Year-over-year Home InventoryClick on graph for larger image.

The red line is for 2025.  The black line is for 2019.  

Inventory was up 32.9% compared to the same week in 2024 (last week it was up 31.0%), and down 16.0% compared to the same week in 2019 (last week it was down 16.1%). 

Inventory passed 2020 same week levels this week and is also above the peak for last year (2024).  

It now appears inventory will be close to 2019 levels towards the end of 2025.

Altos Home InventoryThis second inventory graph is courtesy of Altos Research.

As of May 2nd, inventory was at 744 thousand (7-day average), compared to 729 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube

Sunday, May 04, 2025

Monday: ISM Services

by Calculated Risk on 5/04/2025 06:13:00 PM

Weekend:
Schedule for Week of May 4, 2025

Monday:
• At 10:00 AM ET, the ISM Services Index for April.   The consensus is for a reading of 50.6, down from 50.8.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are down 12 and DOW futures are down 80 (fair value).

Oil prices were down over the last week with WTI futures at $58.29 per barrel and Brent at $61.29 per barrel. A year ago, WTI was at $80, and Brent was at $84 - so WTI oil prices are down about 27% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.14 per gallon. A year ago, prices were at $3.63 per gallon, so gasoline prices are down $0.49 year-over-year.

FOMC Preview: No Change to Fed Funds Rate

by Calculated Risk on 5/04/2025 09:22:00 AM

Most analysts expect no change to FOMC policy at the meeting this week, keeping the target range at 4 1/4 to 4 1/2 percent.    Market participants currently expect the FOMC to also be on hold at the June meeting, with the next rate cut in July, and one or two more rate cuts later in the year.


From BofA:
The May FOMC meeting looks like a placeholder: policy rates on hold and no change in Chair Powell’s tone from his recent speeches. He will probably reiterate that the Fed is assessing the total impact of all policy changes by the Trump Administration, not just trade policy in isolation. We think the bar for a June cut is high, but Powell is unlikely to rule it out at this stage.
emphasis added
Projections will NOT be released at this meeting. For review, here are the March projections.  

The FOMC participants’ midpoint of the target level for the federal funds rate is now at 4.0% at the end of 2025 (3.9%-4.4%) and the long run range is 2.6% to 3.6%.   This is fewer rate cuts than market participants expect.

Since the last projections were released, economic growth has been below expectations (but distorted), the unemployment rate was close to expectations, and inflation at expectations.

The BEA's advance estimate for Q1 GDP showed real growth at -0.3% annualized. There is a wide range of estimates for Q2 GDP, but it is forecast to be close to 2.0%.  That would put real growth for Q1 over Q1, at 1.8% - in the range of the March FOMC projections for Q4 over Q4.  

However, Q2, Q3 and Q4 all saw solid growth last year - and we haven't seen the impact of policy changes on hard data yet - so it is likely Q4 over Q4 GDP will be below the March forecast range.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date202520262027
Mar 20251.5 to 1.91.6 to 1.91.6 to 2.0
Dec 20241.8 to 2.21.9 to 2.11.8 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 4.2% in April and after averaging 4.1% for Q1.  The forecast for the Q4 unemployment rate is likely low.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date202520262027
Mar 20254.3 to 4.44.2 to 4.54.1 to 4.4
Dec 20244.2 to 4.54.1 to 4.44.0 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 March 2025, PCE inflation increased 2.3 percent year-over-year (YoY). There will likely be some increase in PCE inflation from policy, but this appears to in the forecast range.

Without policy changes (tariffs) it appears inflation would be below the FOMC forecast!

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date202520262027
Mar 20252.6 to 2.92.1 to 2.32.0 to 2.1
Dec 20242.3 to 2.62.0-2.22.0

PCE core inflation increased 2.6 percent YoY in March.  This is in the range of FOMC projections for Q4.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date202520262027
Mar 20252.7 to 3.02.1 to 2.42.0 to 2.1
Dec 20242.5 to 2.72.0-2.32.0

Saturday, May 03, 2025

Hotels: Occupancy Rate Decreased 1.0% Year-over-year

by Calculated Risk on 5/03/2025 07:04:00 PM

The U.S. hotel industry reported mixed year-over-year comparisons, according to CoStar’s latest data through 26 April. ...

20-26 April 2025 (percentage change from comparable week in 2024):

Occupancy: 65.1% (-1.0%)
• Average daily rate (ADR): US$161.98 (+4.2%)
• Revenue per available room (RevPAR): US$105.40 (+3.2%)
emphasis added
The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Hotel Occupancy RateClick 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 below 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 mostly move sideways until the summer travel season.  We will likely see a hit to occupancy during the summer months due to less international tourism.

Real Estate Newsletter Articles this Week: House Price Index Up 3.9% year-over-year in February

by Calculated Risk on 5/03/2025 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Case-Shiller House Prices IndicesClick on graph for larger image.

Case-Shiller: National House Price Index Up 3.9% year-over-year in February

Freddie Mac House Price Index Mostly Unchanged in March; Up 3.0% Year-over-year

Fannie and Freddie: Single Family Serious Delinquency Rates Decreased in March

Inflation Adjusted House Prices 0.8% Below 2022 Peak

Final Look at Local Housing Markets in March and a Look Ahead to April Sales

This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.

Schedule for Week of May 4, 2025

by Calculated Risk on 5/03/2025 08:11:00 AM

The key report scheduled for this week is the March trade balance.

The FOMC meets this week and no change to the Fed funds rate is expected.

----- Monday, May 5th -----

10:00 AM: the ISM Services Index for April.   The consensus is for a reading of 50.6, down from 50.8.

----- Tuesday, May 6th -----

U.S. Trade Deficit8:30 AM: Trade Balance report for March from the Census Bureau.

This graph shows the U.S. trade deficit, with and without petroleum, through the most recent report. The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

The consensus is the trade deficit to be $129.0 billion.  The U.S. trade deficit was at $122.7 billion in February as importers rushed to beat the tariffs.

----- Wednesday, May 7th -----

7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

2:00 PM: FOMC Meeting Announcement. No change to to the Fed funds rate is expected at this meeting.

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

----- Thursday, May 8th -----

8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for initial claims of 223 thousand, down from 241 thousand last week.

----- Friday, May 9th -----

No major economic releases scheduled.

Friday, May 02, 2025

May 2nd COVID Update: COVID Deaths Continue to Decline

by Calculated Risk on 5/02/2025 07:56:00 PM

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

For deaths, I'm currently using 4 weeks ago for "now", since the most recent three weeks will be revised significantly.

Note: "Effective May 1, 2024, hospitals are no longer required to report COVID-19 hospital admissions, hospital capacity, or hospital occupancy data."  So, I'm no longer tracking hospitalizations.

COVID Metrics
 NowWeek
Ago
Goal
Deaths per Week378461≤3501
1my goals to stop weekly posts.
🚩 Increasing number weekly for Deaths.
✅ Goal met.

COVID-19 Deaths per WeekClick on graph for larger image.

This graph shows the weekly (columns) number of deaths reported since Jan 2023.

Although weekly deaths met the original goal to stop posting in June 2023 (low of 314 deaths), I've continued to post since deaths are above the goal again - and I'll continue to post until weekly deaths are once again below the goal.

Weekly deaths are now decreasing following the winter pickup and are nearing the lows of last June.

And here is a graph I'm following concerning COVID in wastewater as of May 1st:

COVID-19 WastewaterThis appears to be a leading indicator for COVID hospitalizations and deaths.  This has been moving sideways recently.

Nationally COVID in wastewater is "Low".

Q2 GDP Tracking: Back to Growth, Wide Range

by Calculated Risk on 5/02/2025 03:42:00 PM

From BofA (forecast, not tracking):

GDP contracted by 0.3% q.q saar in 1Q, despite solid final demand (+2.3%). In our assessment, the surge in imports (which took 5.0pp off 1Q growth) due to front-running of tariffs was only partially reflected in stronger inventories and final demand. So we have revised our 2Q GDP forecast to reflect a reversal of this dynamic. We now expect 2.0% headline GDP growth (vs. 0.9% previously), but with weaker final domestic sales. [May 2nd estimate]
emphasis added
From Goldman:
We launched our Q2 GDP tracking estimate at +2.4% (quarter-over-quarter annualized) and our Q2 domestic final sales estimate at +0.6%. [May 1st estimate]
And from the Atlanta Fed: GDPNow
GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the second quarter of 2025 is 1.1 percent on May 1, down from 2.4 percent on April 30. After this morning’s releases from the US Census Bureau and the Institute for Supply Management, the nowcast of second-quarter real personal consumption expenditures growth and real private fixed investment growth fell from 3.3 percent and 1.4 percent, respectively, to 1.9 percent and -0.7 percent. [May 1st estimate]

Heavy Truck Sales Mostly Unchanged YoY in April

by Calculated Risk on 5/02/2025 01:35:00 PM

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the April 2025 seasonally adjusted annual sales rate (SAAR) of 505 thousand.

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new record high of 570 thousand SAAR in April 2019.

Heavy Truck Sales Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."


Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 288 thousand SAAR in May 2020.  

Heavy truck sales were at 505 thousand SAAR in April, up from 450 thousand in March, and up 0.8% from 501 thousand SAAR in April 2025 (essentially unchanged YoY).  

Year-to-date (NSA) sales are down 4.6%.

Usually, heavy truck sales decline sharply prior to a recession and sales were solid in April.  It is likely that some April truck buyers rushed to beat the tariffs - and we might see some weakness next month.

As I mentioned yesterday, light vehicle sales were strong in April at 17.27 million SAAR as some buyers rushed to beat the tariffs.

Vehicle SalesThe second graph shows light vehicle sales since the BEA started keeping data in 1967.  

Light vehicle sales were at 17.27 million SAAR in April, down 3.1% from March, and up 7.8% from April 2024.