by Calculated Risk on 1/30/2023 08:47:00 PM

From Matthew Graham at Mortgage News Daily: Busy Week With Big Ticket Data And The Fed

Unlike last week, the present example offers multiple scheduled economic reports that have consistent track records of causing market movement. Key examples include both ISM reports, ECI, JOLTS, and of course the jobs report on Friday. The Fed announcement lies smack dab in the middle on Wednesday afternoon where it is all but guaranteed that we'll see another downshift in the pace of rate hikes (25bps). [30 year fixed 6.21%]
emphasis added

Tuesday:
• At 9:00 AM ET, FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

• Also at 9:00 AM, S&P/Case-Shiller House Price Index for November. The consensus is for a 6.9% year-over-year increase in the Comp 20 index.

• At 9:45 AM, Chicago Purchasing Managers Index for January. The consensus is for a reading of 44.9, down from 45.1 in December.

• At 10:00 AM, The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

by Calculated Risk on 1/30/2023 02:13:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency increased to 0.65% in December from 0.64% in November. The serious delinquency rate is down from 1.25% in December 2021.  This is at the pre-pandemic lows.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure".

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

Click on graph for larger image

By vintage, for loans made in 2004 or earlier (1% of portfolio), 2.16% are seriously delinquent (down from 2.15% in November). 

For loans made in 2005 through 2008 (1% of portfolio), 3.49% are seriously delinquent (unchanged from 3.49%), 

 For recent loans, originated in 2009 through 2021 (98% of portfolio), 0.53% are seriously delinquent (up from 0.52%). So, Fannie is still working through a handful of poor performing loans from the bubble years.

Mortgages in forbearance were counted as delinquent in this monthly report, but they were not reported to the credit bureaus.

Freddie Mac reported earlier.

by Calculated Risk on 1/30/2023 10:04:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Lawler: D.R. Horton (DHI) Net Order Price Declined "Roughly" 10% from Peak

Brief excerpt:

From housing economist Tom Lawler:

DHI’s average net order price last quarter was actually DOWN 4.1% from the comparable quarter of 2021, and was down 7.9% from the previous quarter.  While some of this decline may have been related to the mix of sales, it’s worth noting that the average net order price was down YOY in all but one of the regions DHI reports on (the “East” saw no change, while the Southwest saw a 10% drop).  In addition, the company on the conference call seemed to suggest that most of the recent price declines have reflected decreased prices and/or increased concessions (see below).

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by Calculated Risk on 1/30/2023 08:41:00 AM

Altos reports inventory was down 1.4% week-over-week. Usually inventory bottoms in February; in 2022, inventory bottomed in early March.  

Here are the same week inventory changes for the last five years:

2023: -6.5K

2022: -5.3K 

2021: -8.3K

2020: -3.7K

2019: +2.7K

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of January 27th, inventory was at 466 thousand (7-day average), compared to 472 thousand the prior week.   

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

The red line is for 2023.  The black line is for 2019.  Note that inventory is up from the previous two years (the record low was in 2022), but still well below normal levels.

Inventory was up 71.5% compared to the same week in 2022, and down 43.7% compared to the same week in 2019. 

A key will be when inventory starts increasing in 2023 - so far inventory has declined slightly over the first four weeks of 2023.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 1/29/2023 06:31:00 PM

Weekend:
• Schedule for Week of January 29, 2023

Monday:
• At 10:30 AM ET, Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 futures are down 5 and DOW futures are down 46 (fair value).

Oil prices were down over the last week with WTI futures at $79.68 per barrel and Brent at $86.66 per barrel. A year ago, WTI was at $88, and Brent was at $92 - so WTI oil prices are DOWN 10% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.50 per gallon. A year ago, prices were at $3.31 per gallon, so gasoline prices are up $0.19 per gallon year-over-year.

by Calculated Risk on 1/29/2023 08:11:00 AM

Expectations are the FOMC will announce a 25bp rate increase in the federal funds rate and analysts will be looking for any mention of a possible pause in rate hikes at the March FOMC meeting.

From Merrill Lynch:

"At the February FOMC meeting, we look for the Fed to raise the target range for the federal funds rate by 25bp to 4.50-4.75%. ... incoming data that points to a broadening of the slowdown and further signs of decelerating price pressures appear to have tipped the balance within the FOMC toward another downshift in the pace of rate hikes next week."
...
We expect Chair Powell to continue to emphasize that a slower pace of rate hikes does not signal the Fed’s job is over. ... the decision may be for a smaller 25bp hike, but the Fed will want to avoid the interpretation that this implies a lower terminal rate or an earlier onset of rate cuts than the committee viewed as appropriate when it last met in December. That means no change in policy rate guidance in the FOMC statement. We think the statement will continue to say that “ongoing increases in the target range [for the federal funds rate] will be appropriate.” A softening in this language could lead to an undesired easing in financial conditions."
emphasis added

No projections will be released at this meeting. For review, here are the December projections.  Since the last meeting, the economy has performed better than the FOMC expected, and inflation was lower than expected.

The BEA reported real GDP increased at a 2.9% annual rate in Q4 and was up 1.0% on a Q4-over-Q4 basis.  This was above the December projections for 2022.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2022	2023	2024	2025
Dec 2022	0.4 to 0.5	0.4 to 1.0	1.3 to 2.0	1.6 to 2.0

¹ Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.

The unemployment rate was at 3.5% in December. This put the Q4 rate at 3.6%, slightly lower than the FOMC projection.  

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2022	2023	2024	2025
Dec 2022	3.7	4.4 to 4.7	4.3 to 4.8	4.0 to 4.7

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of December 2022, PCE inflation was up 5.0% from December 2021. On a Q4-over-Q4 basis PCE inflation was up 5.5% in Q4 2022.   This was below the FOMC projection.

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2022	2023	2024	2025
Dec 2022	5.6 to 5.8	2.9 to 3.5	2.3 to 2.7	2.0 to 2.2

PCE core inflation was up 4.4% in December year-over-year. On a Q4-over-Q4 basis core PCE inflation was up 4.7% in Q4 2022.   This was at the bottom of the FOMC projection range.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2022	2023	2024	2025
Dec 2022	4.7 to 4.8	3.2 to 3.7	2.3 to 2.7	2.0 to 2.2

by Calculated Risk on 1/28/2023 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• New Home Sales at 616,000 Annual Rate in December; Previous 3 Months Revised Down Sharply

• Final Look at Local Housing Markets in December

• 1.51 million Total Housing Completions in 2022 including Manufactured Homes; Most Since 2007

• Has Housing "Bottomed"?

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

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by Calculated Risk on 1/28/2023 10:11:00 AM

The key reports scheduled for this week are the January employment report and November Case-Shiller house prices.

Other key indicators include January ISM manufacturing and services surveys, and January vehicle sales.

The FOMC meets this week, and the FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

----- Monday, January 30th -----
10:30 AM: Dallas Fed Survey of Manufacturing Activity for January. This is the last of the regional Fed manufacturing surveys for January.

----- Tuesday, January 31st -----
9:00 AM: FHFA House Price Index for November. This was originally a GSE only repeat sales, however there is also an expanded index.

9:00 AM ET: S&P/Case-Shiller House Price Index for November.

This graph shows the Year over year change in the nominal seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for a 6.9% year-over-year increase in the Comp 20 index.

9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 44.9, down from 45.1 in December.

10:00 AM: The Q4 Housing Vacancies and Homeownership report from the Census Bureau.

----- Wednesday, February 1st -----
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.

8:15 AM: The ADP Employment Report for January. This report is for private payrolls only (no government). The consensus is for 170,000 payroll jobs added in January, down from 235,000 added in December.

10:00 AM: Construction Spending for December. The consensus is for a 0.1% decrease in construction spending.

10:00 AM ET: Job Openings and Labor Turnover Survey for December from the BLS.

This graph shows job openings (black line), hires (purple), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

Job openings decreased in November to 10.458 million from 10.512 million in October

10:00 AM: ISM Manufacturing Index for January. The consensus is for the ISM to be at 48.0, down from 48.4 in December.

2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce a 25 bp hike in the Fed Funds rate.

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

All day: Light vehicle sales for January. The consensus is for light vehicle sales to be 14.3 million SAAR in January, up from 13.3 million in December (Seasonally Adjusted Annual Rate).

This graph shows light vehicle sales since the BEA started keeping data in 1967. The dashed line is the December sales rate.

----- Thursday, February 2nd -----
8:30 AM: The initial weekly unemployment claims report will be released.  The consensus is for 200 thousand initial claims, up from 186 thousand last week.
----- Friday, February 3rd -----
8:30 AM: Employment Report for December.   The consensus is for 185,000 jobs added, and for the unemployment rate to increase to 3.6%.

There were 223,000 jobs added in December, and the unemployment rate was at 3.5%.

This graph shows the job losses from the start of the employment recession, in percentage terms.

The pandemic employment recession was by far the worst recession since WWII in percentage terms. However, as of August 2022, the total number of jobs had returned and are now 1.24 million above pre-pandemic levels.

10:00 AM: ISM Services Index for January. 

by Calculated Risk on 1/27/2023 09:58:00 PM

On COVID (focus on hospitalizations and deaths).  Data is now weekly.

Weekly deaths bottomed in July 2021 at 1,666.

COVID Metrics
	Now	Week Ago	Goal
New Cases per Week2	295,140	332,606	≤35,0001
Hospitalized2	29,411	34,723	≤3,0001
Deaths per Week2	3,756	3,948	≤3501
1my goals to stop weekly posts, 2Weekly for Cases, Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

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

January was the worst month for the previous two years, and this January has seen a much smaller increase in deaths.

by Calculated Risk on 1/27/2023 04:09:00 PM

From CoStar: STR: MLK Day Leads to Slightly Lower US Weekly Hotel Performance

With the Martin Luther King Jr. holiday, U.S. hotel performance came in slightly lower than the previous week, according to STR‘s latest data through Jan. 21.

Jan. 15-21, 2023 (percentage change from comparable week in 2019*):

• Occupancy: 54.2% (-6.2%)
• Average daily rate (ADR): $140.16 (+11.3%)
• evenue per available room (RevPAR): $75.97 (+4.4%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019. Year-over-year comparisons will once again become standard after Q1.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2023, black is 2020, blue is the median, and dashed light blue is for 2022.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is below the median rate for the previous 20 years (Blue), but this is the slow season - and some of the early year weakness might be related to the timing of the report.

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average of the occupancy rate will increase seasonally over the next few months.