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Friday, June 27, 2025

Q2 GDP Tracking: Moving Down, Still Wide Range

by Calculated Risk on 6/27/2025 02:59:00 PM

There will be additional trade related distortions in Q2 boosting GDP.

From BofA:

Since our last weekly publication, our 2Q GDP tracking is down one-tenth to +2.5% q/q saar. [June 27th estimate]
emphasis added
From Goldman:
We lowered our Q2 GDP tracking estimate by 0.1pp to +3.9% (quarter-over-quarter annualized). Our Q2 domestic final sales estimate stands at 0%. [June 27th 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 2.9 percent on June 27, down from 3.4 percent on June 18. After recent releases from the US Census Bureau and the US Bureau of Economic Analysis, an increase in the nowcast of the contribution of net exports to second-quarter real GDP growth from 2.07 percentage points to 3.49 percentage points was more than offset by a decrease in the nowcasted GDP growth contribution of inventory investment from -0.42 percentage points to -2.22 percentage points. [June 27th estimate]

Final Look at Local Housing Markets in May and a Look Ahead to June Sales

by Calculated Risk on 6/27/2025 11:12:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in May and a Look Ahead to June Sales

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in May.

There were several key stories for May:

• Sales NSA are down year-over-year (YoY) through May, and sales last year were the lowest since 1995! The YoY comparisons will be easier the next several months, so sales in 2025 might be close to the level in 2024.

• Sales SA were down YoY for the 4th consecutive month and 41 of the last 45 months.

• Months-of-supply is at the highest level since 2016 (tying one month near the start of the pandemic).

• The median price is barely up YoY, and with the increases in inventory, some regional areas will see more price declines.

Sales at 4.03 million on a Seasonally Adjusted Annual Rate (SAAR) basis were above the consensus estimate; however, housing economist Tom Lawler’s estimate was right on (usually very close).

Sales averaged close to 5.44 million SAAR for the month of May in the 2017-2019 period. So, sales are about 26% below pre-pandemic levels.
...
Local Markets Closed Existing Home SalesIn May, sales in these markets were down 3.8% YoY. Last month, in April, these same markets were also down 3.8% YoY Not Seasonally Adjusted (NSA). The NAR reported sales in May were down 4.0% YoY NSA, so this sample is close.

Important: There were fewer working days in May 2025 (21) as in May 2024 (22). So, the year-over-year change in the headline SA data was higher than for the NSA data. According to the NAR, seasonally adjusted sales were only down 0.7% YoY in May.
...
More local data coming in July for activity in June!
There is much more in the article.

PCE Measure of Shelter Decreases to 4.1% YoY in May

by Calculated Risk on 6/27/2025 08:55:00 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 May 2025.

ShelterCPI Shelter was up 3.9% year-over-year in May, down from 4.0% in April, and down from the cycle peak of 8.2% in March 2023.


Housing (PCE) was up 4.1% YoY in May, down from 4.2% in April 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.

PCE Prices 6-Month AnnualizedThe second graph shows PCE prices, Core PCE prices and Core ex-housing over the last 3 months (annualized):

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

3-month annualized change:
PCE Price Index: 1.1%
Core PCE Prices: 1.7%
Core minus Housing: 1.1%


There appears to be some residual seasonality, especially in Q1.

Personal Income Decreased 0.4% in May; Spending Decreased 0.1%

by Calculated Risk on 6/27/2025 08:30:00 AM

From the BEA: Personal Income and Outlays, May 2025

Personal income decreased $109.6 billion (0.4 percent at a monthly rate) in May, according to estimates released today by the U.S. Bureau of Economic Analysis. Disposable personal income (DPI)—personal income less personal current taxes—decreased $125.0 billion (0.6 percent) and personal consumption expenditures (PCE) decreased $29.3 billion (0.1 percent).

Personal outlays—the sum of PCE, personal interest payments, and personal current transfer payments—decreased $27.6 billion in May. Personal saving was $1.01 trillion in May and the personal saving rate—personal saving as a percentage of disposable personal income—was 4.5 percent.

From the preceding month, the PCE price index for May increased 0.1 percent. Excluding food and energy, the PCE price index increased 0.2 percent.

From the same month one year ago, the PCE price index for May increased 2.3 percent. Excluding food and energy, the PCE price index increased 2.7 percent from one year ago.
emphasis added
The May PCE price index increased 2.3 percent year-over-year (YoY), up from 2.1 percent YoY in April, and down from the recent peak of 7.2 percent in June 2022.

The PCE price index, excluding food and energy, increased 2.7 percent YoY, up from 2.5 percent in April, and down from the recent peak of 5.6 percent in February 2022.

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

Personal Consumption Expenditures Click on graph for larger image.

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

Personal income and PCE were below expectations.

Inflation was above expectations.

Using the two-month method to estimate Q2 real PCE growth, real PCE was increasing at a 2.4% annual rate in Q2 2024. (Using the mid-month method, real PCE was increasing at 2.0%).  This suggests moderate PCE growth in Q2.

Thursday, June 26, 2025

Friday: Personal Income and Outlays, PCE Inflation

by Calculated Risk on 6/26/2025 07:59:00 PM

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

Friday:
• At 8:30 AM ET: Personal Income and Outlays, May 2024. The consensus is for a 0.4% increase in personal income, and for a 0.3% increase in personal spending. And for the Core PCE price index to increase 0.1%.  PCE prices are expected to be up 2.2% YoY, and core PCE prices up 2.5% YoY.

• At 10:00 AM: University of Michigan's Consumer sentiment index (Final for June).

• At 4:30 PM: Federal Reserve Board announces results from its annual bank stress test

Realtor.com Reports Most Active "For Sale" Inventory since December 2019

by Calculated Risk on 6/26/2025 03:29:00 PM

What this means: On a weekly basis, Realtor.com reports the year-over-year change in active inventory and new listings. On a monthly basis, they report total inventory. For May, Realtor.com reported inventory was up 31.5% YoY, but still down 14.4% compared to the 2017 to 2019 same month levels. 


Here is their weekly report: Weekly Housing Trends: Latest Data as of June 21
Active inventory climbed 27.5% year over year

The number of homes actively for sale remains on a strong upward trajectory, now 27.5% higher than this time last year. This represents the 85th consecutive week of annual gains in inventory. There were more than 1 million homes for sale again last week, marking the eighth week in a row over the threshold and the highest inventory level since December 2019.

New listings—a measure of sellers putting homes up for sale—rose 3.5% year over year

New listings rose again last week on an annual basis, up 3.5% compared with the same period last year. ... This will be an important trend to watch, especially as regional real estate dynamics diverge and the market gradually shifts back in favor of buyers.

The median list price was up 0.9% year over year

The median list price climbed again this week, but it’s still down 0.3% year to date. The median list price per square foot—which adjusts for changes in home size—rose 0.7% year over year. With inventory growing and 1 in 5 sellers slashing prices, the pendulum is swinging back toward a balanced market, as price growth slows and buyers gain more leverage.
With inventory climbing, and sales depressed, months-of-supply is at the highest level since 2016 (excluding the start of pandemic) putting downward pressure on house prices in an increasing number of areas.

Inflation Adjusted House Prices 1.7% Below 2022 Peak; Price-to-rent index is 8.8% below 2022 peak

by Calculated Risk on 6/26/2025 11:44:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 1.7% Below 2022 Peak

Excerpt:

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

In the April Case-Shiller house price index released Tuesday, the seasonally adjusted National Index (SA), was reported as being 78% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 11% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 2% 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 $442,000 today adjusted for inflation (47% 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.
...
Real House PricesThe second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 1.7% below the recent peak, and the Composite 20 index is 1.8% below the recent peak in 2022.

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

It has now been 35 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!

NAR: Pending Home Sales Increase 1.8% in May; Up 1.1% YoY

by Calculated Risk on 6/26/2025 10:00:00 AM

From the NAR: NAR Pending Home Sales Report Reveals 1.8% Increase in May

Pending home sales increased by 1.8% in May from the prior month and 1.1% year-over-year, according to the National Association of REALTORS® Pending Home Sales report. All four U.S. regions experienced month-over-month increases – most notably the West. Year-over-year, contract signings rose in the Midwest and South, while they fell in the Northeast and West.

Northeast
2.1% month-over-month increase.
0.5% year-over-year decrease.

Midwest
0.3% month-over-month increase.
2.6% year-over-year increase.

South
1.0% month-over-month increase.
2.0% year-over-year increase.

West
6.0% month-over-month increase.
1.2% year-over-year decrease.
emphasis added
Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in June and July.

Q1 GDP Growth Revised down to -0.5% Annual Rate

by Calculated Risk on 6/26/2025 08:38:00 AM

From the BEA: Gross Domestic Product, 1st Quarter 2025 (Third Estimate), GDP by Industry, and Corporate Profits (Revised)

Real gross domestic product (GDP) decreased at an annual rate of 0.5 percent in the first quarter of 2025 (January, February, and March), according to the third estimate released by the U.S. Bureau of Economic Analysis. In the fourth quarter of 2024, real GDP increased 2.4 percent..

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

Real GDP was revised down 0.3 percentage point from the second estimate, primarily reflecting downward revisions to consumer spending and exports that were partly offset by a downward revision to imports.
emphasis added
Here is a Comparison of Third and Second Estimates. PCE growth was revised down from 1.2% to 0.5%. Residential investment was revised down from -0.6% to -1.3%.

Weekly Initial Unemployment Claims Decrease to 236,000

by Calculated Risk on 6/26/2025 08:30:00 AM

The DOL reported:

In the week ending June 21, the advance figure for seasonally adjusted initial claims was 236,000, a decrease of 10,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 245,000 to 246,000. The 4-week moving average was 245,000, a decrease of 750 from the previous week's revised average. The previous week's average was revised up by 250 from 245,500 to 245,750.
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 decreased to 245,000.

The previous week was revised up.

Weekly claims were close to the consensus forecast.