by Calculated Risk on 11/06/2024 02:51:00 PM

CR Note: I'll be assessing the impact of Trump's election on the economy, but we have to remember he doesn't do most of what he says. For example, in 2016 he promised to deport 10 million residents, but that never happened. He said he'd repeal and replace the Affordable Care Act; didn't happen. He promised an infrastructure bill. Nope.

But we do know he will increase tariffs and cut taxes on the wealthy.

A few excerpts from a BofA research note:

Tariffs:

We think tariffs on China are likely to increase significantly and in short order after Trump assumes office. The outlook for tariffs against other countries is less clear. In our view, Europe could also see higher tariffs, but Mexico and Canada should continue to enjoy free trade relations with the US.

Immigration and deregulation:

We do not have a strong view on the timing and extent of changes to immigration policy. Roughly speaking, we would expect weaker immigration flows to be a mild, persistent headwind to labor supply and GDP growth. On the flip side, we think broad deregulation, including in energy and financial services, will likely be a tailwind to growth. Increased energy production could marginally offset the increase in headline inflation from tariffs and fiscal easing.

Tariffs could derail the Fed cutting cycle:

We don’t expect the Fed to pre-judge the Trump policy agenda. But we think it will pause the cutting cycle if large tariff increases are announced, assuming the economy is still on solid footing.

by Calculated Risk on 11/06/2024 12:13:00 PM

Today, in the Real Estate Newsletter: Asking Rents Mostly Unchanged Year-over-year

Brief excerpt:

Another monthly update on rents.

Tracking rents is important for understanding the dynamics of the housing market. Slower household formation and increased supply (more multi-family completions) has kept asking rents under pressure. ...

Welcome to the November 2024 Apartment List National Rent Report. National Rent Report. The national median rent dipped by 0.7% in October, as we get further into the slow season for the rental market. The median monthly rent nationally fell by $10, putting it at $1,394, and we’re likely to see that number continue to dip modestly through the remainder of the year. ...

Realtor.com: 14th Consecutive Month with Year-over-year Decline in Rents

In September 2024, the U.S. median rent continued to decline year-over-year for the fourteenth month in a row, down $8 or -0.5% year-over-year for 0-2 bedroom properties across the top 50 metros, faster than the rate of -0.3% seen in August 2024.

by Calculated Risk on 11/06/2024 07:00:00 AM

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

Mortgage applications decreased 10.8 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Applications Survey for the week ending November 1, 2024.

The Market Composite Index, a measure of mortgage loan application volume, decreased 10.8 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 12 percent compared with the previous week. The Refinance Index decreased 19 percent from the previous week and was 48 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 7 percent compared with the previous week and was 2 percent higher than the same week one year ago.

“Ten-year Treasury rates remain volatile and continue to put upward pressure on mortgage rates. The 30- year fixed rate last week increased to 6.81 percent, the highest level since July,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Applications decreased for the sixth consecutive week, with purchase activity falling to its lowest level since mid-August and refinance activity declining to the lowest level since May. The average loan size on a refinance application dropped below $300,000, as borrowers with larger loans tend to be more sensitive to any given changes in mortgage rates.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($766,550 or less) increased to 6.81 percent from 6.73 percent, with points decreasing to 0.68 from 0.69 (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 2% year-over-year unadjusted. 

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

Purchase application activity is up about 4% 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 September but decreased over the last six weeks as rates moved back up.

by Calculated Risk on 11/05/2024 07:23:00 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 11/05/2024 02:19:00 PM

Notes: This CoreLogic House Price Index report is for September. The recent Case-Shiller index release was for August. The CoreLogic HPI is a three-month weighted average and is not seasonally adjusted (NSA).

From CoreLogic: CoreLogic: Annual Home Price Slowdown Continues in September

• On an annual basis, home prices rose by 3.4% in September, the slowest growth rate in over a year, and are projected to slow to 2.3% by the same time next year.

• Miami continued to post the highest gain of tracked U.S. metro areas, at 6.8%, followed closely by Chicago at 6.7%.

• Rhode Island reported the highest annual growth rate of all states at 9%.

• Twenty-seven states reached new home price highs in September.
...
U.S. home price growth continued to cool, slowing to a 3.4% year-over-year in September. Compared to with the month prior, home prices rebounded to post a very slight uptick (0.02%) following months of modest monthly declines. Taken together, home price levels have been relatively flat since late summer. Besides the uncertainty regarding the U.S. election and mortgage rate volatility, the mixed signals around the current state of the U.S. economy may be dampening demand and price appreciation. According to the latest numbers from the U.S. Bureau of Labor Statistics, the economy added just 12,000 jobs in October 2024, the fewest in almost four years. On the other hand, the most recent consumer spending data showed solid continued spending and an upbeat consumer outlook.

“Like much of the housing market at the moment, home prices remained relatively flat coming into the fall,” said CoreLogic Chief Economist Selma Hepp. “Despite some improved affordability from lower mortgage rates during August, homebuyers mostly kept on the sidelines and decided to wait out the mortgage rate drop for a potentially better opportunity next year, when the current volatility, uncertainty surrounding the election’s outcome, and the impact on longer-term rates may be slightly clearer. And while the mortgage rate and economic outlook is full of questions, home prices are likely to maintain their leveled path until early next year when buyers return to the housing market.”
emphasis added

This was a smaller YoY increase than reported for August, and down from the 5.8% YoY increase reported at the beginning of 2024.

This map is from the report.

Nationally, home prices increased by 3.4% year over year in September. One state posted an annual home price decline. The states with the highest increases year over year were Rhode Island (9%) and New Jersey (up by 8.6%).

Hawaii was the only state to record a year-over-year home price loss (-0.4%).

by Calculated Risk on 11/05/2024 12:20:00 PM

Today, in the Real Estate Newsletter: In Q2, almost 20% of Units Started Built-for-Rent were Single Family

Brief excerpt:

Along with the monthly housing starts report for September released last month, the Census Bureau also released Housing Units Started by Purpose and Design through Q2 2024.

The first graph shows the number of single family and multi-family units started with the intent to rent. This data is quarterly and Not Seasonally Adjusted (NSA). Although the majority of units built-for-rent’ are still multi-family (blue), there has been a significant pickup in single family units started built-for-rent (red).

In 2020, there were 44,000 single family units started with the intent to rent. In 2023, that number almost doubled to 77,000 units. There were 23,000 single family units started in Q2 2024 built-for-rent, up from 21,000 in Q2 2023.

For multi-family, there were 83,000 units started to rent in Q2 2024, down almost 40% from 136,000 in Q2 2023.

A total of 106,000 units were started built-for-rent in Q2, with 19% single family units.

There is much more in the newsletter.

by Calculated Risk on 11/05/2024 10:00:00 AM

(Posted with permission). The ISM® Services index was at 56.0%, up from 54.9% last month. The employment index increased to 53.0%, from 48.1%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 56% October 2024 Services ISM® Report On Business®

Economic activity in the services sector expanded for the fourth consecutive month in October, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 56 percent, which is the highest reading since July 2022 and indicates sector expansion for the 50th time in 53 months.

The report was issued today by Steve Miller, CPSM, CSCP, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In October, the Services PMI® registered 56 percent, 1.1 percentage points higher than September’s figure of 54.9 percent. The reading in October marked the eighth time the composite index has been in expansion territory this year. The Business Activity Index registered 57.2 percent in October, 2.7 percentage points lower than the 59.9 percent recorded in September, indicating a fourth month of expansion after a contraction in June. The New Orders Index decreased to 57.4 percent in October, 2 percentage points lower than September’s figure of 59.4 percent. The Employment Index landed in expansion territory for its third time in four months; the reading of 53 percent is a 4.9-percentage point increase compared to the 48.1 percent recorded in September.
emphasis added

The PMI was well above expectations.

by Calculated Risk on 11/05/2024 08:30:00 AM

The Census Bureau and the Bureau of Economic Analysis reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $84.4 billion in September, up $13.6 billion from $70.8 billion in August, revised.

September exports were $267.9 billion, $3.2 billion less than August exports. September imports were $352.3 billion, $10.3 billion more than August imports
emphasis added

Click on graph for larger image.

Exports decreased and imports increased in September.

Exports are up 2.4% year-over-year; imports are up 8.8% year-over-year.

Both imports and exports decreased sharply due to COVID-19 and then bounced back - imports and exports have generally increased recently.

The second graph shows the U.S. trade deficit, with and without petroleum.

The blue line is the total deficit, and the black line is the petroleum deficit, and the red line is the trade deficit ex-petroleum products.

Note that net, exports of petroleum products are positive and have been increasing.

The trade deficit with China increased to $31.8 billion from $28.4 billion a year ago.

It is possible some importers are trying to beat potential tariffs.

by Calculated Risk on 11/04/2024 06:38:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Start Week Slightly Lower as Election Volatility Works Both Ways

Love it or hate it, election-related volatility has been having a big impact on the bond market and, thus, mortgage rates.
...
Mortgage rates didn't react in an extreme fashion, but the average lender moved back down toward 7% for a top tier conventional 30yr fixed scenario. The same scenario was closer to 7.125% late last week. [30 year fixed 7.05%]
emphasis added

Tuesday:
• U.S. Election

• At 8:30 AM ET, Trade Balance report for September from the Census Bureau.  The consensus is for the deficit to be $73.5 billion in September, from $70.4 billion in August.

• At 10:00 AM, the ISM Services Index for October.  The consensus is for a decrease to 53.3 from 54.9.

by Calculated Risk on 11/04/2024 02:06:00 PM

This was released on Friday. From the Census Bureau reported that overall construction spending decreased:

Construction spending during September 2024 was estimated at a seasonally adjusted annual rate of $2,148.8 billion, 0.1 percent above the revised August estimate of $2,146.0 billion. The September figure is 4.6 percent above the September 2023 estimate of $2,055.2 billion.
emphasis added

Private spending was unchanged and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,653.6 billion, virtually unchanged from the revised August estimate of $1,653.2 billion. ...

In September, the estimated seasonally adjusted annual rate of public construction spending was $495.2 billion, 0.5 percent above the revised August estimate of $492.9 billion.

Click on graph for larger image.

This graph shows private residential and nonresidential construction spending, and public spending, since 1993. Note: nominal dollars, not inflation adjusted.

Residential (red) spending is 6.8% below the peak in 2022.

Non-residential (blue) spending is 0.8% below the peak in June 2024.

Public construction spending is at the peak.

The second graph shows the year-over-year change in construction spending.

On a year-over-year basis, private residential construction spending is up 4.1%. Non-residential spending is up 3.5% year-over-year. Public spending is up 7.0% year-over-year.

This was close to consensus expectations of no change in spending.