by Calculated Risk on 10/20/2024 09:50:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: Update on the “Neutral” Rate and Early Read on September Existing Home Sales

A brief excerpt:

From housing economist Tom Lawler:

Early Read on Existing Home Sales in September

Based on publicly-available local realtor/MLS reports released across the country through today, I project that existing home sales as estimated by the National Association of Realtors ran at a seasonally adjusted annual rate of 3.83 million in September, down 0.8% from August’s preliminary pace and down 3.8% from last September’s seasonally adjusted pace.

Local realtor/MLS reports suggest that the median existing single-family home sales price last month was up by about 3.9% from a year earlier.

CR Note on September sales: The National Association of Realtors (NAR) is scheduled to release September Existing Home Sales on Wednesday, October 23rd at 10 AM ET. The consensus is for 3.89 million SAAR, up from 3.86 million in August. The cycle low was 3.85 million SAAR in October 2023.

Update on the “Neutral” Rate

Executive Summary: Estimates of the “neutral” real interest rate are all over the map.  Based on an assessment of various measures, my best is that the neutral real interest rate in the US is between 1 ¾% to 2%.  One of course needs to add inflation/inflation expectations to that range.  If/when the Fed were to achieve its 2% inflation target, then the neutral nominal interest rate would be 3 ¾% to 4%.

There is much more in the article.

by Calculated Risk on 10/19/2024 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

Click on graph for larger image.

• Housing Starts Decreased to 1.354 million Annual Rate in September

• Part 2: Current State of the Housing Market; Overview for mid-October 2024

• 3rd Look at Local Housing Markets in September

• Lawler: Changes in Various Interest Rates Since the FOMC Cut Its Target Fed Funds Rate by 50 Basis Points

• 2nd Look at Local Housing Markets in September

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

by Calculated Risk on 10/19/2024 08:11:00 AM

The key economic reports this week are September New and Existing Home sales.

For manufacturing, the Richmond and Kansas City Fed manufacturing surveys will be released this week.

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

----- Tuesday, October 22nd -----
10:00 AM: Richmond Fed Survey of Manufacturing Activity for October.

10:00 AM: State Employment and Unemployment (Monthly) for September 2024

----- Wednesday, October 23rd -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

10:00 AM: Existing Home Sales for September from the National Association of Realtors (NAR). The consensus is for 3.89 million SAAR, up from 3.86 million in August.

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

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

2:00 PM: the Federal Reserve Beige Book, an informal review by the Federal Reserve Banks of current economic conditions in their Districts.

----- Thursday, October 24th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 247 thousand initial claims, up from 241 thousand last week.

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

10:00 AM: New Home Sales for September from the Census Bureau.

This graph shows New Home Sales since 1963. The dashed line is the sales rate for last month.

The consensus is for 710 thousand SAAR, down from 716 thousand in August.

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

----- Friday, October 25th -----
10:00 AM: University of Michigan's Consumer sentiment index (Final for October). The consensus is for a reading of 69.0.

by Calculated Risk on 10/18/2024 07:11:00 PM

Note: 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
	Now	Week Ago	Goal
Deaths per Week	997	1,186	≤3501
1my goals to stop weekly posts, 🚩 Increasing number weekly for Deaths ✅ Goal met.

Click on graph for larger image.

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

Although weekly deaths met the original goal to stop posting, I'm continuing to post now that deaths are above the goal again.  

Weekly deaths are triple the low of 302 in early June but are now declining and will likely continue to decline based on wastewater sampling.

And here is a graph I'm following concerning COVID in wastewater as of October 10th:

This appears to be a leading indicator for COVID hospitalizations and deaths.

COVID in wastewater is declining - less than double the lows of last May - suggesting weekly deaths will continue to decline.

by Calculated Risk on 10/18/2024 03:49:00 PM

Container traffic gives us an idea about the volume of goods being exported and imported - and usually some hints about the trade report since LA area ports handle about 40% of the nation's container port traffic.

The following graphs are for inbound and outbound traffic at the ports of Los Angeles and Long Beach in TEUs (TEUs: 20-foot equivalent units or 20-foot-long cargo container).

To remove the strong seasonal component for inbound traffic, the first graph shows the rolling 12-month average.

Click on graph for larger image.

On a rolling 12-month basis, inbound traffic increased 1.2% in September compared to the rolling 12 months ending in August.   Outbound traffic decreased 0.7% compared to the rolling 12 months ending the previous month.

The 2nd graph is the monthly data (with a strong seasonal pattern for imports).

Usually imports peak in the July to October period as retailers import goods for the Christmas holiday, and then decline sharply and bottom in the Winter depending on the timing of the Chinese New Year.  

Imports were up 14% YoY in September, and exports were down 9% YoY.    

This was a very strong August and September for imports as retailers prepare for holiday shopping - and possibly to beat any increase in tariffs. 

It is also possible some importers shifted traffic to the West Coast ports to avoid the possible strike (now settled).

by Calculated Risk on 10/18/2024 12:54:00 PM

From BofA:

Since our last weekly publication, our 3Q GDP tracking estimate increased by four-tenths to 3.0% q/q saar. [Oct 18th estimate]
emphasis added

From Goldman:

On net, we lowered our Q3 GDP tracking estimate by 0.1pp to +3.1% (quarter-over-quarter annualized). [Oct 17th estimate]

And from the Atlanta Fed: GDPNow

The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2024 is 3.4 percent on October 18, unchanged from October 17 after rounding. After this morning's housing starts report from the US Census Bureau, the nowcast of third-quarter real residential investment growth increased from -10.1 percent to -9.8 percent. [Oct 18th estimate]

by Calculated Risk on 10/18/2024 09:10:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.354 million Annual Rate in September

A brief excerpt:

Total housing starts in September were slightly above expectations and starts in July and August were revised up. A solid report.

The third graph shows the month-to-month comparison for total starts between 2023 (blue) and 2024 (red).

Total starts were down 0.7% in September compared to September 2023.  The YoY decrease in September total starts was due weakness in multi-family starts.

Single family starts have been up year-over-year in 13 of the last 15 months, whereas multi-family has been up year-over-year in only 1 of last 15 months. Year-to-date (YTD), total starts are down 3.4% compared to the same period in 2023. Single family starts are up 10.1% YTD, and multi-family down 30.6% YTD.

There is much more in the article.

by Calculated Risk on 10/18/2024 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in September were at a seasonally adjusted annual rate of 1,354,000. This is 0.5 percent below the revised August estimate of 1,361,000 and is 0.7 percent below the September 2023 rate of 1,363,000. Single-family housing starts in September were at a rate of 1,027,000; this is 2.7 percent above the revised August figure of 1,000,000. The September rate for units in buildings with five units or more was 317,000.

Building Permits:
Privately-owned housing units authorized by building permits in September were at a seasonally adjusted annual rate of 1,428,000. This is 2.9 percent below the revised August rate of 1,470,000 and is 5.7 percent below the September 2023 rate of 1,515,000. Single-family authorizations in September were at a rate of 970,000; this is 0.3 percent above the revised August figure of 967,000. Authorizations of units in buildings with five units or more were at a rate of 398,000 in September.
emphasis added

Click on graph for larger image.

The first graph shows single and multi-family housing starts since 2000.

Multi-family starts (blue, 2+ units) decreased in September compared to August.   Multi-family starts were down 16.2% year-over-year.

Single-family starts (red) increased in September and were up 5.5% year-over-year.

The second graph shows single and multi-family housing starts since 1968.

This shows the huge collapse following the housing bubble, and then the eventual recovery - and the recent collapse and recovery in single-family starts.

Total housing starts in September were slightly above expectations and starts in July and August were revised up.  

I'll have more later …

by Calculated Risk on 10/17/2024 07:51:00 PM

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

Thursday:
• At 8:30 AM ET, Housing Starts for September. The consensus is for 1.350 million SAAR, down from 1.356 million SAAR.

by Calculated Risk on 10/17/2024 04:01:00 PM

Earlier from the Fed: Industrial Production and Capacity Utilization

Industrial production (IP) decreased 0.3 percent in September after advancing 0.3 percent in August. A strike at a major producer of civilian aircraft held down total IP growth by an estimated 0.3 percent in September, and the effects of two hurricanes subtracted an estimated 0.3 percent. For the third quarter as a whole, industrial production declined at an annual rate of 0.6 percent. Manufacturing output moved down 0.4 percent in September, and the index for mining fell 0.6 percent. The index for utilities gained 0.7 percent. At 102.6 percent of its 2017 average, total industrial production in September was 0.6 percent below its year-earlier level. Capacity utilization edged down to 77.5 percent in September, a rate that is 2.2 percentage points below its long-run (1972–2023) 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 above the level in February 2020 (pre-pandemic).

Capacity utilization at 77.5% is 2.2% below the average from 1972 to 2022.  This was below 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 decreased to 102.6. This is above the pre-pandemic level.

Industrial production was below consensus expectations.

by Calculated Risk on 10/17/2024 12:57:00 PM

Today, in the Calculated Risk Real Estate Newsletter: 3rd Look at Local Housing Markets in September

A brief excerpt:

NOTE: The tables for active listings, new listings and closed sales all include a comparison to September 2019 for each local market (some 2019 data is not available).

This is the third look at several early reporting local markets in September. I’m tracking over 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.

Closed sales in September were mostly for contracts signed in July and August when 30-year mortgage rates averaged 6.85% and 6.50%, respectively (Freddie Mac PMMS).
...
In September, sales in these markets were down 6.0% YoY. Last month, in August, these same markets were down 5.2% year-over-year Not Seasonally Adjusted (NSA).

Important: There were the same number of working days in September 2024 (20) as in September 2023 (20). So, the year-over-year change in the headline SA data will be similar to the NSA data. Last month there was one fewer working day in August 2024 compared to August 2023 (22 vs 23), so seasonally adjusted sales were down less than NSA sales.
...
Last year, the NAR reported sales in September 2023 at 3.98 million SAAR.  This data suggests that the September existing home sales report will show a year-over-year decline.  The cycle low was 3.85 million SAAR in October 2023.  A new cycle low is possible.
...
More local markets to come!

There is much more in the article.

by Calculated Risk on 10/17/2024 10:00:00 AM

The National Association of Home Builders (NAHB) reported the housing market index (HMI) was at 43, up from 41 last month. Any number below 50 indicates that more builders view sales conditions as poor than good.

From the NAHB: Builder Confidence Edges Higher Despite Affordability Headwinds

With inflation gradually easing and builders anticipating mortgage rates will moderate in coming months, builder sentiment moved higher for a second consecutive month despite challenging affordability conditions.

Builder confidence in the market for newly built single-family homes was 43 in October, up two points from a reading of 41 in September, according to the National Association of Home Builders (NAHB)/Wells Fargo Housing Market Index (HMI) released today.

“While housing affordability remains low, builders are feeling more optimistic about 2025 market conditions,” said NAHB Chairman Carl Harris, a custom home builder from Wichita, Kan. “The wild card for the outlook remains the election, and with housing policy a top tier issue for candidates, policymakers should be focused on supply-side solutions to the housing crisis.”

“Despite the beginning of the Fed’s easing cycle, many prospective home buyers remain on the sideline waiting for lower interest rates,” said NAHB Chief Economist Robert Dietz. “We are forecasting uneven declines for mortgage interest rates in the coming quarters, which will improve housing demand but place stress on building lot supplies due to tight lending conditions for development and construction loans.”

The latest HMI survey also revealed that the share of builders cutting prices held steady at 32% in October, the same rate as last month. Meanwhile, the average price reduction returned to the long-term trend of 6% after dropping to 5% in September. The use of sales incentives was 62% in October, slightly up from 61% in September.
...
All three HMI indices were up in October. The index charting current sales conditions rose two points to 47, the component measuring sales expectations in the next six months increased four points to 57 and the gauge charting traffic of prospective buyers posted a two-point gain to 29.

Looking at the three-month moving averages for regional HMI scores, the Northeast increased two points to 51, the Midwest moved two points higher to 41, the South held steady at 41 and the West increased three points to 41.
emphasis added

Click on graph for larger image.

This graph shows the NAHB index since Jan 1985.

This was slightly above the consensus forecast.

by Calculated Risk on 10/17/2024 08:45:00 AM

The DOL reported:

In the week ending October 12, the advance figure for seasonally adjusted initial claims was 241,000, a decrease of 19,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 258,000 to 260,000. The 4-week moving average was 236,250, an increase of 4,750 from the previous week's revised average. The previous week's average was revised up by 500 from 231,000 to 231,500.
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 increased to 236,250.

The previous week was revised up.

Weekly claims were below the consensus forecast. 

The increase over the last two weeks is partially hurricane related.

by Calculated Risk on 10/17/2024 08:38:00 AM

On a monthly basis, retail sales increased 0.4% from August to September (seasonally adjusted), and sales were up 1.7 percent from September 2023.

From the Census Bureau report:

Advance estimates of U.S. retail and food services sales for September 2024, adjusted for seasonal variation and holiday and trading-day differences, but not for price changes, were $714.4 billion, an increase of 0.4 percent from the previous month, and up 1.7 percent from September 2023. ... The July 2024 to August 2024 percent change was unrevised from up 0.1 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 2.9% on a YoY basis.

The change in sales in September was above expectations, and sales in July and August were revised up, combined.

by Calculated Risk on 10/16/2024 07:37:00 PM

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

Thursday:
• At 8:30 AM ET, Retail sales for September will be released.  The consensus is for a 0.2% increase in retail sales.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released. The consensus is for 265 thousand initial claims, up from 258 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for October. The consensus is for a reading of 3.0, up from 1.7.

• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for September. The consensus is for a 0.1% decrease in Industrial Production, and for Capacity Utilization to decrease to 77.9%.

• At 10:00 AM, The October NAHB homebuilder survey. The consensus is for a reading of 42, up from 41 in September. Any number below 50 indicates that more builders view sales conditions as poor than good.

by Calculated Risk on 10/16/2024 02:49:00 PM

The following graph shows real GDP quarterly (blue, annualized), and the year-over-year change in GDP (red).

Click on graph for larger image.

The pandemic slump and subsequent economic recovery are cutoff and marked.  

In general, this is the rate of growth that we should expect, see: Demographics and GDP: 2% is the new 4%

by Calculated Risk on 10/16/2024 11:32:00 AM

Note: I've received a number of requests lately to post this again, so here is another update of tracking employment during Presidential terms.  We frequently use Presidential terms as time markers - we could use Speaker of the House, Fed Chair, or any other marker.

Important: There are many differences between these periods. Overall employment was smaller in the '80s, however the participation rate was increasing in the '80s (younger population and women joining the labor force), and the participation rate is generally declining now.  But these graphs give an overview of employment changes.

The first graph shows the change in private sector payroll jobs from when each president took office until the end of their term(s). Presidents Carter, George H.W. Bush, and Trump only served one term.

Mr. G.W. Bush (red) took office following the bursting of the stock market bubble and left during the bursting of the housing bubble. Mr. Obama (dark blue) took office during the financial crisis and great recession. There was also a significant recession in the early '80s right after Mr. Reagan (dark red) took office.

There was a recession towards the end of President G.H.W. Bush (light purple) term, and Mr. Clinton (light blue) served for eight years without a recession.   There was a pandemic related recession in 2020.

First, here is a table for private sector jobs. The previous top two private sector terms were both under President Clinton.  

Term	Private Sector Jobs Added (000s)
Biden	14,5561
Clinton 1	10,876
Clinton 2	10,094
Obama 2	9,926
Reagan 2	9,351
Carter	9,039
Reagan 1	5,363
Obama 1	1,907
GHW Bush	1,507
GW Bush 2	443
GW Bush 1	-820
Trump	-2,192
1After 44 months.

Click on graph for larger image.

The first graph is for private employment only.

Private sector employment increased by 9,039,000 under President Carter (dashed green), by 14,714,000 under President Reagan (dark red), 1,507,000 under President G.H.W. Bush (light purple), 20,970,000 under President Clinton (light blue), lost 377,000 under President G.W. Bush, and gained 11,833,000 under President Obama (dark dashed blue).  During Trump's term (Orange), the economy lost 2,135,000 private sector jobs.

In the first 44 months of President Biden's term (Blue), the economy has added 14,556,000 private sector jobs, with the initial growth as the economy recovered from the pandemic.

 A big difference between the presidencies has been public sector employment.  Note: the bumps in public sector employment due to the decennial Census in 1980, 1990, 2000, 2010 and 2020. 

The public sector grew during Mr. Carter's term (up 1,304,000), during Mr. Reagan's terms (up 1,414,000), during Mr. G.H.W. Bush's term (up 1,127,000), during Mr. Clinton's terms (up 1,934,000), and during Mr. G.W. Bush's terms (up 1,744,000 jobs).  However, the public sector declined significantly while Mr. Obama was in office (down 263,000 jobs).  During Trump's term, the economy lost 528,000 public sector jobs.

In the first 44 months of President Biden's term, the economy has added 1,633,000 public sector jobs (about 93% of public job growth has been for state and local governments, and about 55% for education).

And a table for public sector jobs. Public sector jobs increased have increased the most during Biden's term, ahead of the number during Reagan's 2nd term.  Public sector jobs declined the most during Obama's first term.

Term	Public Sector Jobs Added (000s)
Biden	1,6331
Reagan 2	1,438
Carter	1,304
Clinton 2	1,242
GHW Bush	1,127
GW Bush 1	900
GW Bush 2	844
Clinton 1	692
Obama 2	447
Reagan 1	-24
Trump	-528
Obama 1	-710
1After 44 months.

by Calculated Risk on 10/16/2024 07:00:00 AM

From the MBA: Mortgage Applications Decrease in Latest MBA Weekly Survey

Mortgage applications decreased 17.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 11, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 17.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 17 percent compared with the previous week. The Refinance Index decreased 26 percent from the previous week and was 111 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 7 percent from one week earlier. The unadjusted Purchase Index decreased 7 percent compared with the previous week and was 7 percent higher than the same week one year ago.

“Mortgage rates moved higher for the third consecutive week, with the 30-year fixed rate increasing to 6.52 percent, its highest level since August,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The recent uptick in rates has put a damper on applications. Refinance applications fell 26 percent to their lowest level since August, with comparable drops in both conventional and government refinances. This pushed the refinance share of applications back below 50 percent for the first time in over a month. Furthermore, purchase applications also decreased but notably remain 7 percent higher than a year ago.”

Added Kan, “Demand is holding up to an extent for prospective first-time buyers. FHA purchase applications were little changed despite the increase in rates, as some first-time homebuyers remain in the market because of improving housing inventory conditions.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.52 percent from 6.36 percent, with points increasing to 0.65 from 0.62 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added

Click on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is up 7% year-over-year unadjusted. 

Red is a four-week average (blue is weekly).  

Purchase application activity is up about 10% from the lows in late October 2023, but still about 8% below the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index increased significantly as mortgage rates declined last month but decreased over the last three weeks as rates increased.

by Calculated Risk on 10/15/2024 07:54:00 PM

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

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

by Calculated Risk on 10/15/2024 12:13:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Part 2: Current State of the Housing Market; Overview for mid-October 2024

A brief excerpt:

On Friday, in Part 1: Current State of the Housing Market; Overview for mid-October 2024 I reviewed home inventory, housing starts and sales.

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

“If you do not know where you come from, then you don't know where you are, and if you don't know where you are, then you don't know where you're going. And if you don't know where you're going, you're probably going wrong.” Terry Pratchett

These “Current State” summaries show us where we came from, where we are, and hopefully give us clues as to where we are going!

The Case-Shiller National Index increased 5.0% year-over-year in July and will likely slow further in the August report (based on other data).

For the second consecutive month, the MoM increase in the seasonally adjusted (SA) Case-Shiller National Index was at 0.18% (a 2.2% annual rate), This was the eighteenth consecutive MoM increase, but this tied the previous as the smallest MoM increase in the last 18 months.

There is much more in the article.