by Calculated Risk on 11/22/2024 10:18:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: Preliminary 2025 Housing Forecasts

Excerpt:

Towards the end of each year, I collect some housing forecasts for the following year - and also provide my own outlook. Several more forecast will be available in early December.
...
The table below shows several early forecasts for 2025:

A few points from these early forecasts:

1. Forecasters expect house prices to increase next year in the low-to-mid single digits.

2. Everyone expects multi-family starts to stay depressed in 2025.

3. Everyone expects both new and existing home sales to increase in 2025, although existing home sales are expected to remain in the low 4 million range.

by Calculated Risk on 11/22/2024 08:11:00 AM

The new administration is talking about cutting the number of federal government employees.

This raises the question of how many people are employed by the Federal government?

The following data is from the BLS and does not include military personnel.

The first graph shows total government employment (Federal, State and Local).

Click on graph for larger image.

First, most government employees are local (police officers, fire department, etc), followed by state employees.  There are almost 15 million local government employees and 5.5 million state government employees. 

Approximately half of the state and local employees work in education (teachers!)

The Federal government has about 3.0 million employees.  Note that the spikes in Federal employment are for decennial Census.

The second graph shows total Federal employees, and Federal employees excluding postal workers since 1960.

Once again, the spikes are the decennial Census!

Currently there are just over 600 thousand postal workers, and just under 2.4 million other federal employees.

The Federal government has outsourced some functions to the private sector.

The third graph shows Federal employment as a percent of total employment.

Federal employment was around 4.3% of total employment in 1960 and is now down to 1.9%.

Just some numbers and graphs to keep in mind during the discussion of federal employment cuts.

by Calculated Risk on 11/21/2024 09:13:00 PM

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

Friday:
• At 10:00 AM ET, University of Michigan's Consumer sentiment index (Final for November).

by Calculated Risk on 11/21/2024 05:25:00 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 September, Realtor.com reported inventory was up 29.2% YoY, but still down 21.1% compared to the 2017 to 2019 same month levels. 

 Now - on a weekly basis - inventory is up 25.9% YoY.

Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report: Weekly Housing Trends View—Data for Week Ending Nov. 16, 2024

• Active inventory increased, with for-sale homes 25.9% above year-ago levels

For the 54th consecutive week, the number of homes for sale has increased compared with the same time last year. However, this week’s growth was smaller than last week’s, marking the eighth consecutive week of deceleration and the smallest annual increase since late March.

• New listings—a measure of sellers putting homes up for sale—climbed 3.5% this week compared with one year ago

The number of newly listed homes saw a slight uptick compared with the same week last year, offering a glimmer of hope for buyers seeking fresh inventory. However, the recent climb in mortgage rates might deter many potential sellers from entering the market, particularly those locked into lower rates who are hesitant to trade up to higher borrowing costs.

Here is a graph of the year-over-year change in inventory according to realtor.com. 

Inventory was up year-over-year for the 54th consecutive week.  

However, inventory is still historically low.

New listings remain below typical pre-pandemic levels.

by Calculated Risk on 11/21/2024 02:15:00 PM

From ICE: ICE First Look at Mortgage Performance: Serious delinquencies hit 17-month high while foreclosure activity remains historically muted

• At 3.45% in October, the national delinquency rate was up 6% from the same time last year, marking five consecutive months of year-over-year increases

• While 30- & 60-day delinquencies decreased from September, seriously past due loans (90+ days) continued their slow rise, now up 7.3% from last year and at the highest level since May 2023

• Though both foreclosure starts (+12.2%) and completions (+10.1%) were up in October, both remain down from last year (-12.3% and -9.5%, respectively) and well below pre-pandemic levels

• Likewise, foreclosure inventory was up a modest +1K in the month, but there are 28K fewer loans in active foreclosure than there were at this same time last year

• Prepayment activity rose on easing interest rates to a level not seen in over two years (May 2022) and nearly double where it was last October
emphasis added

Click on graph for larger image.

Here is a table from ICE.

by Calculated Risk on 11/21/2024 10:51:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: NAR: Existing-Home Sales Increased to 3.96 million SAAR in October

Excerpt:

As expected, existing home sales were up year-over-year for the first time since 2021. This was a combination of weak sales in October last year and lower mortgage rates in August and September when contracts were signed (Existing home sales are reported at closing).
...
The sales rate was above the consensus forecast (but at housing economist Tom Lawler’s estimate).
...
Sales Year-over-Year and Not Seasonally Adjusted (NSA)

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

Sales increased 2.9% year-over-year compared to October 2023. This was the first year-over-year increase since July 2021.

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

From the NAR: Existing-Home Sales Grew 3.4% in October; First Year-Over-Year Gain Since July 2021

Existing-home sales rose in October, according to the National Association of REALTORS®. Sales improved in all four major U.S. regions. Year-over-year, sales elevated in three regions but were unchanged in the Northeast.

Total existing-home sales – completed transactions that include single-family homes, townhomes, condominiums and co-ops – expanded 3.4% from September to a seasonally adjusted annual rate of 3.96 million in October. Year-over-year, sales progressed 2.9% (up from 3.85 million in October 2023).
...
Total housing inventory registered at the end of October was 1.37 million units, up 0.7% from September and 19.1% from one year ago (1.15 million). Unsold inventory sits at a 4.2-month supply at the current sales pace, down from 4.3 months in September but up from 3.6 months in October 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 October (3.96 million SAAR) were up 3.4% from the previous month and were 2.9% above the October 2023 sales rate.  This was the first year-over-year increase since July 2021.

The second graph shows nationwide inventory for existing homes.

According to the NAR, inventory increased to 1.37 million in October from 1.36 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 19.1% year-over-year (blue) in October compared to October 2023.

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

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

by Calculated Risk on 11/21/2024 08:30:00 AM

The DOL reported:

In the week ending November 16, the advance figure for seasonally adjusted initial claims was 213,000, a decrease of 6,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 217,000 to 219,000. The 4-week moving average was 217,750, a decrease of 3,750 from the previous week's revised average. The previous week's average was revised up by 500 from 221,000 to 221,500.
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 decreased to 217,750.

The previous week was revised up.

Weekly claims were below the consensus forecast.

by Calculated Risk on 11/20/2024 08:18:00 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 222 thousand initial claims, up from 217 thousand last week.

• Also at 8:30 AM, the Philly Fed manufacturing survey for November. The consensus is for a reading of 5.0, down from 10.3.

• At 10:00 AM, Existing Home Sales for October from the National Association of Realtors (NAR). The consensus is for 3.88 million SAAR, up from 3.84 million in September.

• At 11:00 AM, the Kansas City Fed manufacturing survey for November.

by Calculated Risk on 11/20/2024 02:33:00 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 2.2% in October compared to the rolling 12 months ending in August.   Outbound traffic increased 0.9% 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 29% YoY in October, and exports were up 11% YoY.    

This was a very strong July through October period for imports as retailers prepare for holiday shopping - and likely to stockpile goods prior to the increase in tariffs. 

by Calculated Risk on 11/20/2024 12:35:00 PM

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

From the AIA: ABI October 2024: Business conditions at architecture firms begin to moderate

The AIA/Deltek Architecture Billings Index (ABI) score for the month was 50.3, meaning that the share of firms that reported declining billings was essentially equal to the share of firms that reported increasing billings. In addition, inquiries into new projects ticked up in October to the highest level in six months. However, despite declining interest rates and softening inflation, clients remain hesitant to start new projects. The value of newly signed design contracts softened further in October, as they declined for the seventh consecutive month. Responding firms this month indicated that many clients were still awaiting the outcomes of the November elections, at both a national and more local level, before determining how to proceed on new projects.

Business conditions varied significantly across the country in October. While firms located in the Northeast saw billings decline further from September, firms located in the South reported billings growth for the first time in two years. And while billings continued to decline at firms located in the Midwest and West, the pace of the decline in those regions slowed from recent months. Conditions also varied at firms of different specializations this month. Firms with an institutional specialization saw slight billings growth for the first time since January, while business conditions remained softer at firms with multifamily residential and commercial/industrial specializations.
...
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 (45.6); Midwest (46.9); South (52.1); West (47.6)

• Sector index breakdown: commercial/industrial (47.0); institutional (50.5); multifamily residential (45.6)

Click on graph for larger image.

This graph shows the Architecture Billings Index since 1996. The index was at 50.3 in October, up from 45.7 in September.  Anything above 50 indicates an increase in demand for architects' services.

This index has indicated contraction for 23 of the last 25 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-seven consecutive months (with revisions).   This suggests we will see a further weakness in multi-family starts.

by Calculated Risk on 11/20/2024 09:23:00 AM

Today, in the CalculatedRisk Real Estate Newsletter: California Home Sales Up 9.5% SA YoY in October

Excerpt:

The National Association of Realtors (NAR) is scheduled to release October Existing Home sales on Thursday, Nov 21st at 10:00 AM. The consensus is for 3.88 million SAAR, up from 3.84 million in September. Last year, the NAR reported sales in October 2023 at 3.85 million SAAR. This will be the first year-over-year gain since August 2021 following 37 months with a year-over-year decline.

Housing economist Tom Lawler expects the NAR to report sales of 3.97 million SAAR for October.
...
From the California Association of Realtors® (C.A.R.): California housing market bounces back in October as both home sales and median price post increases from previous month and year, C.A.R. reports

October’s sales pace climbed 4.7 percent from the 253,010 homes sold in September and was up 9.5 percent from a year ago, when a revised 241,910 homes were sold on an annualized basis. The year-over-year sales pace reached its highest level in 40 months, partly because of a low sales base in 2023, when sales dropped nearly 12 percent compared to the previous year.

There is much more in the article.

by Calculated Risk on 11/20/2024 07:00:00 AM

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

Mortgage applications increased 1.7 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending November 15, 2024.

The Market Composite Index, a measure of mortgage loan application volume, increased 1.7 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 1 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 43 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 2 percent from one week earlier. The unadjusted Purchase Index decreased 3 percent compared with the previous week and was 1 percent lower than the same week one year ago.

“Mortgage rates moved higher for the fourth consecutive week, with the 30-year fixed rate increasing to 6.90 percent, its highest level since July 2024. However, even with the uptick in rates, overall mortgage applications increased,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “The pickup in purchase applications was driven by conventional and FHA loans, with FHA purchase applications seeing a 7 percent increase. For-sale inventory has loosened in some markets and some potential buyers have been able to take advantage of increasing supply and lower FHA rates which were down slightly in comparison to the conforming 30-year fixed rate. Refinance activity rose slightly last week, driven largely by a 10 percent increase in VA applications.”
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The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.90 percent from 6.86 percent, with points increasing to 0.70 from 0.60 (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 down 1% year-over-year unadjusted. 

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

Purchase application activity is up about 9% from the lows in late October 2023, but still about 10% 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 as mortgage rates declined in September but has decreased as rates moved back up.

by Calculated Risk on 11/19/2024 08:57:00 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.

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

by Calculated Risk on 11/19/2024 03:53:00 PM

From housing economist Tom Lawler:

According to CME FedWatch, the “market-based” probability that the FOMC will cut its federal funds rate target by 25 bp at its December meeting is about 59%. Folks will also play close attention to the release of the FOMC’s Summary of Economic Projections (SEP) from meeting participants. Below is a table showing some of the key projections from the last four SEPs.

Click on table for larger image.

Compared to the SEP from the September FOMC meeting, real GDP growth for 2024 will probably be significant higher than the median projection (and near the top of the forecast range), the unemployment rate will likely be significantly below the median projection, and core PCE inflation will likely be higher than the median projection.

With growth significantly higher and inflation somewhat higher than projected in September by most meeting participants in the second half of this year (and growth was a LOT higher than projected by some meeting participants), one might expect that (1) the projected path of the federal funds rate over the next year will imply fewer rate cuts than was the case in September, and (2) the median (and average) long-term implied neutral interest rate will again move up.

Here is a chart showing futures rate for the federal funds rate for December 2024 through December 2025 for June 12, September 18, and November 15 of this year.

For the second half of 2025, fed funds futures rates on November 15 were almost 100 bp higher than was the case on September 18, and were about 25 bp lower than was the case on June 12.

by Calculated Risk on 11/19/2024 11:58:00 AM

I'll have more on port traffic once Los Angeles releases their data for October.

From the Port of Long Beach: Port of Long Beach Reaches All-Time Record in October

The Port of Long Beach moved nearly 1 million cargo containers in October, achieving its strongest month in its 113-year history, driven by brisk demand for holiday goods and delayed containership arrivals caused by a nearby traffic incident and fire that affected some terminal operations at the end of September.

Dockworkers and terminal operators moved 987,191 twenty-foot equivalent units in October, up 30.7% from the same month last year and surpassing the Port’s previous all-time one-month record set just two months earlier in August 2024 by 8%. Imports jumped 34.2% to 487,563 TEUs and exports rose 25.3% to 112,845 TEUs. Empty containers moved through the Port grew 28.1% to 386,782 TEUs. October also marked the Port’s fifth consecutive monthly year-over-year cargo increase.

The Port of Long Beach inbound traffic is up almost 30% year-over-year for the last four months as importers are apparently rush to stockpile goods prior to the implementation of the new tariffs.  The Port of Los Angeles has seen a similar surge in imports.

by Calculated Risk on 11/19/2024 09:08:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Housing Starts Decreased to 1.311 million Annual Rate in October

A brief excerpt:

Total housing starts in October were below expectations, however, starts in August and September were revised up, combined.

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

Total starts were down 4.0% in October compared to October 2023.  The YoY decrease in October total starts was mostly due weakness in multi-family starts.

Single family starts have been up year-over-year in 13 of the last 16 months, whereas multi-family has been up year-over-year in only 2 of last 17 months. Year-to-date (YTD), total starts are down 3.2% compared to the same period in 2023. Single family starts are up 9.3% YTD, and multi-family down 29.3% YTD.

There is much more in the article.

by Calculated Risk on 11/19/2024 08:30:00 AM

From the Census Bureau: Permits, Starts and Completions

Housing Starts:
Privately-owned housing starts in October were at a seasonally adjusted annual rate of 1,311,000. This is 3.1 percent below the revised September estimate of 1,353,000 and is 4.0 percent below the October 2023 rate of 1,365,000. Single-family housing starts in October were at a rate of 970,000; this is 6.9 percent below the revised September figure of 1,042,000. The October rate for units in buildings with five units or more was 326,000.

Building Permits:
Privately-owned housing units authorized by building permits in October were at a seasonally adjusted annual rate of 1,416,000. This is 0.6 percent below the revised September rate of 1,425,000 and is 7.7 percent below the October 2023 rate of 1,534,000. Single-family authorizations in October were at a rate of 968,000; this is 0.5 percent above the revised September figure of 963,000. Authorizations of units in buildings with five units or more were at a rate of 393,000 in October.
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) increased month-over-month in October.   Multi-family starts were down 12.6% year-over-year.

Single-family starts (red) decreased in October and were down 0.5% 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 October were below expectations, however starts in August and September were revised up, combined.

I'll have more later …

by Calculated Risk on 11/18/2024 06:53:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Didn't Move Much Over The Weekend

The average top tier conventional 30yr fixed rate was just a hair over 7% on Friday afternoon and the same is true at the start of the new week.
...
As for the risk of more serious volatility, the only sure bet is that the first two weeks of December are the most important 2 weeks left in 2024. This has to do with the economic data on tap and its impact on the Fed announcement that will follow on the 3rd week. [30 year fixed 7.08%]
emphasis added

Tuesday:
• At 8:30 AM ET, ,Housing Starts for October. The consensus is for 1.338 million SAAR, down from 1.354 million SAAR.

• At 10:00 AM, State Employment and Unemployment (Monthly) for October 2024

by Calculated Risk on 11/18/2024 05:20:00 PM

From the MBA: Share of Mortgage Loans in Forbearance Increases to 0.47% in October

The Mortgage Bankers Association’s (MBA) monthly Loan Monitoring Survey revealed that the total number of loans now in forbearance increased to 0.47% as of October 31, 2024. According to MBA’s estimate, 235,000 homeowners are in forbearance plans. Mortgage servicers have provided forbearance to approximately 8.4 million borrowers since March 2020.

The share of Fannie Mae and Freddie Mac loans in forbearance increased 7 basis points to 0.20% in October 2024. Ginnie Mae loans in forbearance increased by 30 basis points to 1.06%, and the forbearance share for portfolio loans and private-label securities (PLS) increased 6 basis points to 0.43%.

“Approximately 65,000 more borrowers are in forbearance compared to one month ago,” said Marina Walsh, CMB, MBA’s Vice President of Industry Analysis. “While forbearances are still low compared to the height of the pandemic, the monthly increase in forbearances is the largest since May 2020 and likely driven by the effects of Hurricanes Helene and Milton.”

Added Walsh, “Of those loans in forbearance, 45 percent are related to natural disasters while the remaining 55 percent are primarily related to temporary hardship such as job loss, death, divorce, or disability. Notwithstanding the storms, some borrowers may be experiencing other economic distress. October marks the fifth consecutive month in which the forbearance rate has increased, and the performance of overall servicing portfolios and loan workouts weakened compared to this time one year ago.
emphasis added

At the end of October, there were about 235,000 homeowners in forbearance plans.