by Calculated Risk on 10/24/2024 02:33:00 PM

From ICE: ICE First Look at Mortgage Performance: September Sees Prepayments at Two-Year High, Slowly Rising Mortgage Delinquencies

• The national delinquency rate rose 14 basis points to 3.48% in September, up 4.3% from August and 5.7% year over year

• September marked the fourth consecutive year-over-year rise in mortgage delinquencies, the longest such stretch since early 2018 outside of the initial impact of the COVID pandemic

• A 5.9% bump brought serious delinquencies (90+ days past due but not yet in active foreclosure) to a 16-month high and delivered a second consecutive month of year-over-year increases

• 30-day delinquencies hit a three-month high and 60-days were at the highest since January 2021; foreclosure activity remained muted, with both starts and sales/completions down in September

• The number of loans in active foreclosure was up marginally (+0.4%) month over month but down 12.5% from this time last year and still 34% below pre-pandemic levels

• Prepayment activity rose to a level not seen since August 2022; a +2.5% increase from the month prior and up +43.2% from last September
emphasis added

Click on graph for larger image.

Here is a table from ICE.

by Calculated Risk on 10/24/2024 10:54:00 AM

Today, in the Calculated Risk Real Estate Newsletter: New Home Sales Increase to 738,000 Annual Rate in September

Brief excerpt:

The Census Bureau reported New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 738 thousand. The previous three months were revised down.
...
The next graph shows new home sales for 2023 and 2024 by month (Seasonally Adjusted Annual Rate). Sales in September 2024 were up 6.3% from September 2023.

New home sales, seasonally adjusted, have increased year-over-year in 17 of the last 18 months.

Note that this is the opposite of Existing Home sales that have been down year-over-year for thirty-seven consecutive months!

There is much more in the article.

by Calculated Risk on 10/24/2024 10:00:00 AM

The Census Bureau reports New Home Sales in September were at a seasonally adjusted annual rate (SAAR) of 738 thousand.

The previous three months were revised down.

Sales of new single-family houses in September 2024 were at a seasonally adjusted annual rate of 738,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 4.1 percent above the revised August rate of 709,000 and is 6.3 percent above the September 2023 estimate of 694,000.
emphasis added

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

New home sales were close to pre-pandemic levels.

The second graph shows New Home Months of Supply.

The months of supply decreased in September to 7.6 months from 7.9 months in August.

The all-time record high was 12.2 months of supply in January 2009. The all-time record low was 3.3 months in August 2020.

This is well above the top of the normal range (about 4 to 6 months of supply is normal).

"The seasonally-adjusted estimate of new houses for sale at the end of September was 470,000. This represents a supply of 7.6 months at the current sales rate. "

Sales were above expectations of 710 thousand SAAR, however, sales for the three previous months were revised down. I'll have more later today.

by Calculated Risk on 10/24/2024 08:30:00 AM

The DOL reported:

In the week ending October 19, the advance figure for seasonally adjusted initial claims was 227,000, a decrease of 15,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 241,000 to 242,000. The 4-week moving average was 238,500, an increase of 2,000 from the previous week's revised average. The previous week's average was revised up by 250 from 236,250 to 236,500.
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 238,500.

The previous week was revised up.

Weekly claims were below the consensus forecast. 

The recent increase was partially hurricane related.

by Calculated Risk on 10/23/2024 07:29:00 PM

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

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released. The consensus is for 247 thousand initial claims, up from 241 thousand last week.

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

• At 10:00 AM, New Home Sales for September from the Census Bureau. The consensus is for 710 thousand SAAR, down from 716 thousand in August.

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

by Calculated Risk on 10/23/2024 05:44:00 PM

From WardsAuto: October U.S. Light-Vehicle Sales Forecast to Start Q4 with Small Gain (pay content).  Brief excerpt:

The fourth quarter is forecast to total 4.13 million units, 6.0% above year-ago’s 3.89 million, which was tamped down because of labor-related strikes at three automakers that pared inventory
emphasis added

Click on graph for larger image.

This graph shows actual sales from the BEA (Blue), and Wards forecast for October (Red).

On a seasonally adjusted annual rate basis, the Wards forecast of 15.9 million SAAR, would be up 0.8% from last month, and up 3.6% from a year ago.

by Calculated Risk on 10/23/2024 02:48:00 PM

Note: This index is a leading indicator primarily for new Commercial Real Estate (CRE) investment.

From the AIA: Architecture firm billings worsened in September

The AIA/Deltek Architecture Billings Index (ABI) score was 45.7 for the month, as the majority of firms continued to report declining billings.

Despite recently announced rate cuts by the Federal Reserve, clients are still cautious about future projects. Inquiries into potential new projects continued to increase, but the pace has slowed since the beginning of the year. And the value of newly signed design contracts at firms decreased for the sixth consecutive month in September, although the pace of that decline has moderated somewhat over the last few months. However, firms continue to report average backlogs of 6.4 months, which remains above pre-pandemic historical averages and is a good indicator of existing work in the pipeline, even if new work coming in has slowed.

Conditions remained soft across the country as well in September. Billings were softest at firms located in the West for the third consecutive month, followed by firms located in the Midwest. Business conditions may be close to turning positive at firms located in the South, though, where they only declined slightly this month. By firm specialization, firms with a multifamily residential specialization saw billings soften further in September, while billings also remained fairly weak at firms with a commercial/industrial specialization. Although billings continued to decline at firms with an institutional specialization as well, the pace of that decline remained more modest than at firms of other specializations, which has been the case since the beginning of the summer.
...
The ABI score is a leading economic indicator of construction activity, providing an approximately nine-to-twelve-month glimpse into the future of nonresidential construction spending activity. The score is derived from a monthly survey of architecture firms that measures the change in the number of services provided to clients.
emphasis added

• Northeast (46.4); Midwest (45.0); South (49.5); West (42.6)

• Sector index breakdown: commercial/industrial (44.2); institutional (48.5); multifamily residential (41.7)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 45.7 in September, unchanged from 45.7 in August.  Anything below 50 indicates a decrease in demand for architects' services.

This index has indicated contraction for 23 of the last 24 months.

Note: This includes commercial and industrial facilities like hotels and office buildings, multi-family residential, as well as schools, hospitals and other institutions.

This index usually leads CRE investment by 9 to 12 months, so this index suggests a slowdown in CRE investment into 2025.

Note that multi-family billing turned down in August 2022 and has been negative for twenty-six consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.

by Calculated Risk on 10/23/2024 02:00:00 PM

Fed's Beige Book

On balance, economic activity was little changed in nearly all Districts since early September, though two Districts reported modest growth. Most Districts reported declining manufacturing activity. Activity in the banking sector was generally steady to up slightly, and loan demand was mixed, with some Districts noting an improvement in the outlook due to the decline in interest rates. Reports on consumer spending were mixed, with some Districts noting shifts in the composition of purchases, mostly toward less expensive alternatives. Housing market activity has generally held up: inventory continued to expand in much of the nation, and home values largely held steady or rose slightly. Still, uncertainty about the path of mortgage rates kept some buyers on the sidelines, and the lack of affordable housing remained a persistent problem in many communities. Commercial real estate markets were generally flat, although data center and infrastructure projects boosted activity in a few Districts. The short-lived dockworkers strike caused only minor temporary disruptions. Hurricane damage impacted crops and prompted pauses in business activity and tourism in the Southeast. Agricultural activity was flat to down modestly, with some crop prices remaining unprofitably low. Energy activity was also unchanged or down modestly, and lower energy prices reportedly compressed producers’ margins. Despite elevated uncertainty, contacts were somewhat more optimistic about the longer-term outlook.

Labor Markets

On balance, employment increased slightly during this reporting period, with more than half of the Districts reporting slight or modest growth and the remaining Districts reporting little or no change. Many Districts reported low worker turnover, and layoffs reportedly remained limited. Demand for workers eased somewhat, with hiring focused primarily on replacement rather than growth. Worker availability improved, as many contacts reported it had become easier to find the workers they need.

Prices

Inflation continued to moderate with selling prices reportedly increasing at a slight or modest pace in most Districts.
emphasis added

by Calculated Risk on 10/23/2024 10:37:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: NAR: Existing-Home Sales Decreased to 3.84 million SAAR in September, New Cycle Low

Excerpt:

Sales Year-over-Year and Not Seasonally Adjusted (NSA)

The fourth graph shows existing home sales by month for 2023 and 2024.

Sales declined 3.5% year-over-year compared to September 2023. This was the thirty-seventh consecutive month with sales down year-over-year.

by Calculated Risk on 10/23/2024 10:00:00 AM

From the NAR: Existing-Home Sales Slid 1.0% in September

Existing-home sales drew back in September, according to the National Association of REALTORS®. Three out of four major U.S. regions registered sales declines while the West experienced a sales bounce. Year-over-year, sales fell in three regions but grew in the West.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – receded 1.0% from August to a seasonally adjusted annual rate of 3.84 million in September. Year-over-year, sales waned 3.5% (down from 3.98 million in September 2023).
...
Total housing inventory registered at the end of September was 1.39 million units, up 1.5% from August and 23.0% from one year ago (1.13 million). Unsold inventory sits at a 4.3-month supply at the current sales pace, up from 4.2 months in August and 3.4 months in September 2023.
emphasis added

Click on graph for larger image.

This graph shows existing home sales, on a Seasonally Adjusted Annual Rate (SAAR) basis since 1994.

Sales in September (3.84 million SAAR) were down 1.0% from the previous month and were 3.5% below the September 2023 sales rate.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.39 million in September from 1.37 million the previous month.

Headline inventory is not seasonally adjusted, and inventory usually decreases to the seasonal lows in December and January, and peaks in mid-to-late summer.

The last graph shows the year-over-year (YoY) change in reported existing home inventory and months-of-supply. Since inventory is not seasonally adjusted, it really helps to look at the YoY change. Note: Months-of-supply is based on the seasonally adjusted sales and not seasonally adjusted inventory.

Inventory was up 23.0% year-over-year (blue) in September compared to September 2023.

Months of supply (red) increased to 4.3 months in September from 4.2 months the previous month.

The sales rate was below the consensus forecast.  I'll have more later. 

by Calculated Risk on 10/23/2024 07:00:00 AM

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

Mortgage applications decreased 6.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending October 18, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 6.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 7 percent compared with the previous week. The Refinance Index decreased 8 percent from the previous week and was 90 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 5 percent compared with the previous week and was 3 percent higher than the same week one year ago.

“Mortgage rates saw mixed results last week, but the 30-year fixed rate remained unchanged at 6.52 percent. Application activity decreased to its lowest level since July, as both purchase and refinance applications saw declines,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Purchase applications continued to run stronger than last year’s pace for the fifth consecutive week. Even though rates have been on a recent upswing, they are over a full percentage point lower than a year ago, which has kept some homebuyers in the market. For-sale inventory has started to loosen, and home-price growth has eased in some markets, providing more options for buyers in combination with these lower rates.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) remained unchanged at 6.52 percent, with points decreasing to 0.64 from 0.65 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans. The effective rate remained unchanged from last week.
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 3% year-over-year unadjusted. 

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

Purchase application activity is up about 5% from the lows in late October 2023, but still about 13% 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 four weeks as rates increased.

by Calculated Risk on 10/22/2024 07:01:00 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.

• At 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.

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

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

by Calculated Risk on 10/22/2024 11:46:00 AM

Every year I track seasonal retail hiring for hints about holiday retail sales.  At the bottom of this post is a graph showing the correlation between October seasonal hiring and holiday retail sales.

Here is a graph of retail hiring for previous years based on the BLS employment report:

Click on graph for larger image.

This graph shows the historical net retail jobs added for October, November and December by year.

Retailers hired 574 thousand seasonal workers last year (using BLS data, Not Seasonally Adjusted), and 156 thousand seasonal workers last October.

Note that in the early '90s, retailers started hiring seasonal workers earlier - and the trend towards hiring earlier has continued.

The following scatter graph is for the years 2005 through 2023 and compares October retail hiring with the real increase (inflation adjusted) for retail sales (Q4 over previous Q4).

In general October hiring is a pretty good indicator of seasonal sales. R-square is 0.72 for this small sample. Note: This uses retail sales in Q4, and excludes autos, gasoline and restaurants. 

NOTE: The dot in the upper right - with real Retail sales up over 10% YoY is for 2020 - when retail sales soared due to the pandemic spending on goods (service spending was soft).

When the October employment report is released on Friday, November 1st, I'll be looking at seasonal retail hiring for hints on what the retailers actually expect for the holiday season.

by Calculated Risk on 10/22/2024 08:39:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: California Home Sales Up 5% SA YoY in September

Excerpt:

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.

Housing economist Tom Lawler estimates the NAR will report September sales of 3.83 million SAAR. The cycle low was 3.85 million SAAR in October 2023.
...
Here is the press release from the California Association of Realtors® (C.A.R.): California housing demand drops in September as buyers remain hesitant amid falling mortgage rates, C.A.R. reports

September’s sales pace decreased 3.4 percent from the 262,050 homes sold in August and was up 5.1 percent from a year ago, when a revised 240,840 homes were sold on an annualized basis. The sales pace has remained below the 300,000-threshold for the past two years, while year-to-date home sales edged up 0.9 percent from the first nine months of 2023.

There is much more in the article.

by Calculated Risk on 10/21/2024 07:53:00 PM

From Matthew Graham at Mortgage News Daily: Rates Jump Quickly to Highest Levels Since July

By the smallest of margins, mortgage rates are back up to levels last seen in July. That means we've gone from being fairly close to 6% in mid-September to being nearly as close to 7% today when it comes to top tier 30yr fixed scenarios for the average lender.

Today's jump was particularly quick and frustratingly lacking in satisfying explanations. It's not the explanations make bad news any more palatable, but it's always more frustrating to be confronted with unpleasantness that seems to be happening for no good reason. [30 year fixed 6.82%]
emphasis added

Tuesday:
• At 10:00 AM ET, Richmond Fed Survey of Manufacturing Activity for October.

• Also at 10:00 AM, State Employment and Unemployment (Monthly) for September 2024

by Calculated Risk on 10/21/2024 04:51:00 PM

From the MBA: Share of Mortgage Loans in Forbearance Increases to 0.34% in September

The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance increased to 0.34% as of September 30, 2024. According to MBA’s estimate, 170,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 8.3 million borrowers since March 2020.

The share of Fannie Mae and Freddie Mac loans in forbearance remained the same as the previous month at 0.13% in September 2024. Ginnie Mae loans in forbearance increased by 10 basis points to 0.76%, and the forbearance share for portfolio loans and private-label securities (PLS) increased 2 basis points to 0.37%.

“The percentage of loans in forbearance increased for the fourth consecutive month,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “Since May 2024, Ginnie Mae loans in forbearance increased by almost 40 basis points, compared to six basis points for portfolio and PLS loans and three basis points for Fannie and Freddie loans.”

Added Walsh, “We are seeing some weakening in loan performance, particularly among government products. Overall government loan performance reached a new low for the year in September. In addition, the share of government post-forbearance workouts that are current dropped considerably over the past four months. These trends indicate that some homeowners are exhibiting signs of distress – whether because of economic hardships, natural disasters, or other reasons.”
emphasis added

At the end of August, there were about 170,000 homeowners in forbearance plans.

by Calculated Risk on 10/21/2024 01:59:00 PM

After the election in November 2016, I wrote The Future is still Bright! and The Cupboard is Full. I pointed out that there were many tailwinds for the economy (heading into 2017) and that most of Mr. Trump's proposals probably wouldn't happen like repealing the ACA or deporting 10+ million people. However, as expected, Trump did cut taxes on high income earners.

I also noted in 2016: "The general rule is don't invest based on your political views, however it is also important to look at the impact of specific policies."

For the upcoming election, most key economists and analysts (Goldman Sachs, Moody's and more) believe the economy will perform better under Harris than Trump.  I agree.  If Harris is elected, the economy will mostly continue on the current path and the US economy is the envy of the world (a better recovery from the pandemic than most other countries).  There is always more to do, but the US has done better than most.

However, I doubt I will be as sanguine as I was in 2016 if Mr. Trump is elected again.  

Although Trump is lazy and incoherent regarding policy (everything is always 2 weeks away - aka "Free beer tomorrow"), he is making many of the same promises again (repeal ACA, deport 20+ million people, cut taxes on the wealthy, raise taxes on lower- and middle-income earners via tariffs).  Some of those promises might happen and have a negative impact on the economy.

I'll write more on the economic outlook after the election.

by Calculated Risk on 10/21/2024 11:00:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: NMHC on Apartments: "Looser market conditions for the ninth consecutive quarter"

Excerpt:

From the NMHC: Though the Apartment Market Continues to Loosen, Deal Flow Increases for Third Consecutive Quarter as Debt and Equity Conditions Improve

Apartment market conditions showed signs of improvement in the National Multifamily Housing Council’s (NMHC’s) October 2024 Quarterly Survey of Apartment Market Conditions. All but the Market Tightness (37) index indicated more favorable conditions this quarter, with Sales Volume (67), Equity Financing (63) and Debt Financing (77) all coming in above the breakeven level (50)
...
• The Market Tightness Index came in at 37 this quarter – below the breakeven level of 50 – indicating looser market conditions for the ninth consecutive quarter. While close to half of respondents (46%) thought market conditions were unchanged relative to three months ago, 40% of respondents thought markets have become looser, up from 27% in July. Fifteen percent of respondents reported tighter markets than three months ago.

This index has been an excellent leading indicator for rents and vacancy rates, and this suggests higher vacancy rates and a further weakness in asking rents. This is the ninth consecutive quarter with looser conditions than the previous quarter.

There is much more in the article.

by Calculated Risk on 10/21/2024 08:11:00 AM

Altos reports that active single-family inventory was up 1.0% week-over-week. Inventory is now up 49.7% from the February seasonal bottom.  

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 2024.  The black line is for 2019.  

Inventory was up 33.4% compared to the same week in 2023 (last week it was up 34.0%), and down 21.0% compared to the same week in 2019 (last week it was down 22.6%). 

Back in June 2023, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels is closing.

This second inventory graph is courtesy of Altos Research.

As of October 18th, inventory was at 739 thousand (7-day average), compared to 732 thousand the prior week. 

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 10/20/2024 06:20:00 PM

Weekend:
• Schedule for Week of October 20, 2024

Monday:
• No major economic releases scheduled.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 4 and DOW futures are up 12 (fair value).

Oil prices were down over the last week with WTI futures at $69.22 per barrel and Brent at $73.06 per barrel. A year ago, WTI was at $89, and Brent was at $96 - so WTI oil prices are down about 22% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.13 per gallon. A year ago, prices were at $3.52 per gallon, so gasoline prices are down $0.39 year-over-year.