by Calculated Risk on 3/27/2025 11:28:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Inflation Adjusted House Prices 0.8% Below 2022 Peak

Excerpt:

It has been over 18 years since the housing bubble peak. In the January Case-Shiller house price index released this week, the seasonally adjusted National Index (SA), was reported as being 78% above the bubble peak in 2006. However, in real terms, the National index (SA) is about 12% above the bubble peak (and historically there has been an upward slope to real house prices). The composite 20, in real terms, is 3% above the bubble peak.

People usually graph nominal house prices, but it is also important to look at prices in real terms. As an example, if a house price was $300,000 in January 2010, the price would be $440,000 today adjusted for inflation (47% increase). That is why the second graph below is important - this shows "real" prices.

The third graph shows the price-to-rent ratio, and the fourth graph is the affordability index. The last graph shows the 5-year real return based on the Case-Shiller National Index.
...
The second graph shows the same two indexes in real terms (adjusted for inflation using CPI).

In real terms (using CPI), the National index is 0.8% below the recent peak, and the Composite 20 index is 1.2% below the recent peak in 2022. The real National index and the Composite 20 index increased slightly in real terms in January.

It has now been 32 months since the real peak in house prices. Typically, after a sharp increase in prices, it takes a number of years for real prices to reach new highs (see House Prices: 7 Years in Purgatory)

There is much more in the article!

Weekly Schedule

by Calculated Risk on 3/27/2025 10:00:00 AM

From the NAR: Pending Home Sales Advanced 2.0% in February

Pending home sales improved 2.0% in February according to the National Association of REALTORS®. The Northeast and West experienced month-over-month losses in transactions – with a larger decrease in the West – while the Midwest and South saw gains, which were greatest in the South. Year-over-year, contract signings dropped in all four U.S. regions, with the Midwest undergoing the greatest reduction.

The Pending Home Sales Index (PHSI)* – a forward-looking indicator of home sales based on contract signings – grew 2.0% to 72.0 in February. Year-over-year, pending transactions declined 3.6%. An index of 100 is equal to the level of contract activity in 2001.

"Despite the modest monthly increase, contract signings remain well below normal historical levels," said NAR Chief Economist Lawrence Yun. "A meaningful decline in mortgage rates would help both demand and supply – demand by boosting affordability, and supply by lessening the power of the mortgage rate lock-in effect."
...
The Northeast PHSI fell 0.9% from last month to 62.8, down 2.5% from February 2024. The Midwest index inched up 0.7% to 73.3 in February, down 4.7% from the previous year.

The South PHSI jumped 6.2% to 86.0 in February, down 3.4% from a year ago. The West index contracted by 3.0% from the prior month to 55.9, down 3.5% from February 2024.
emphasis added

Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in March and April.

by Calculated Risk on 3/27/2025 08:44:00 AM

From the BEA: Gross Domestic Product, 4th Quarter and Year 2024 (Third Estimate), GDP by Industry, and Corporate Profits

Real gross domestic product (GDP) increased at an annual rate of 2.4 percent in the fourth quarter of 2024 (October, November, and December), according to the third estimate released by the U.S. Bureau of Economic Analysis. In the third quarter, real GDP increased 3.1 percent.

The increase in real GDP in the fourth quarter primarily reflected increases in consumer spending and government spending that were partly offset by a decrease in investment. Imports, which are a subtraction in the calculation of GDP, decreased. ... Real GDP was revised up 0.1 percentage point from the second estimate, primarily reflecting a downward revision to imports.
emphasis added

Here is a Comparison of Third and Second Estimates. PCE growth was revised down to 4.0% from 4.2%. Residential investment was revised up from 5.4% to 5.5%.

by Calculated Risk on 3/27/2025 08:30:00 AM

The DOL reported:

In the week ending March 22, the advance figure for seasonally adjusted initial claims was 224,000, a decrease of 1,000 from the previous week's revised level. The previous week's level was revised up by 2,000 from 223,000 to 225,000. The 4-week moving average was 224,000, a decrease of 4,750 from the previous week's revised average. The previous week's average was revised up by 1,750 from 227,000 to 228,750.
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 224,000.

The previous week was revised up.

Weekly claims were close to the consensus forecast.

by Calculated Risk on 3/26/2025 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 225 initial claims up from 223 thousand last week.

• Also at 8:30 AM, Gross Domestic Product, 4th Quarter and Year 2024 (Third Estimate), GDP by Industry, and Corporate Profits. The consensus is that real GDP increased 2.3% annualized in Q4, unchanged from 2.3% in the second estimate.

• At 10:00 AM, Pending Home Sales Index for February. 

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

by Calculated Risk on 3/26/2025 02:10:00 PM

This is something to watch again. Here is another monthly update on lumber prices.

SPECIAL NOTE: The CME group discontinued the Random Length Lumber Futures contract on May 16, 2023.  I switched to a physically-delivered Lumber Futures contract that was started in August 2022.  Unfortunately, this impacts long term price comparisons since the new contract was priced about 24% higher than the old random length contract for the period when both contracts were available.

This graph shows CME random length framing futures through August 2022 (blue), and the new physically-delivered Lumber Futures (LBR) contract starting in August 2022 (Red).

On March 26, 2025, LBR was at $678.00 per 1000 board feet, up 15% from a year ago.

Click on graph for larger image.

There is somewhat of a seasonal demand for lumber, and lumber prices frequently peak in the first half of the year.

We didn't see a significant runup in the Spring period of 2023 or 2024 due to the housing slowdown.  

The recent increase might be due to tariffs.  This is the highest price since the pandemic related shortages.

by Calculated Risk on 3/26/2025 10:18:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Final Look at Local Housing Markets in February and a Look Ahead to March Sales

A brief excerpt:

After the National Association of Realtors® (NAR) releases the monthly existing home sales report, I pick up additional local market data that is reported after the NAR. This is the final look at local markets in February.

The big story for February was that existing home sales decreased year-over-year (YoY) following four consecutive months with a year-over-year increase. Sales at 4.26 million on a Seasonally Adjusted Annual Rate (SAAR) basis were above the consensus estimate; however, this was primarily because of the seasonal adjustment for February. Housing economist Tom Lawler’s estimate was very close (as usual).

Sales averaged over 5.5 million SAAR for the month of February in the 2017-2020 period. So, sales were still about 23% below pre-pandemic levels.
...
Here is a look at months-of-supply using NSA sales. Since this is NSA data, it is likely months-of-supply will increase into the Summer.

Months in red will likely see 6+ months of supply this summer and might see price pressures. There is nothing magical about 6 months; some areas see price declines with less inventory, some more.

Note: This month, for months-of-supply, I broke out Miami (Miami-Dade) from the “Miami Area” this also includes Broward County and Palm Beach.
...
More local data coming in April for activity in March!

There is much more in the article.

by Calculated Risk on 3/26/2025 07:00:00 AM

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

Mortgage applications decreased 2.0 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending March 21, 2025.

The Market Composite Index, a measure of mortgage loan application volume, decreased 2.0 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index decreased 2 percent compared with the previous week. The Refinance Index decreased 5 percent from the previous week and was 63 percent higher than the same week one year ago. The seasonally adjusted Purchase Index increased 1 percent from one week earlier. The unadjusted Purchase Index increased 1 percent compared with the previous week and was 7 percent higher than the same week one year ago.

“Purchase applications saw the strongest weekly pace in almost two months and were 7 percent higher than a year ago. Last week’s purchase activity was driven primarily by a 6 percent increase in FHA applications, as the combination of loosening housing inventory and slowly declining mortgage rates have presented this segment of buyers with more opportunities,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Additionally, VA purchase applications saw a modest increase over the week. Overall applications declined, however, as refinance applications were down 5 percent to its lowest level in a month.”

Added Kan, “Markets remained focused on potential trade policy changes, while the Fed held the funds rate its current level, resulting in the 30-year fixed rate averaging 6.71 percent last week.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($806,500 or less) decreased to 6.71 percent from 6.72 percent, with points decreasing to 0.60 from 0.64 (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 24% from the lows in late October 2023 and is only 3% above the lowest levels during the housing bust.  

The second graph shows the refinance index since 1990.

The refinance index declined after increasing sharply the previous two weeks and remains very low.

by Calculated Risk on 3/25/2025 07:15:00 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 8:30 AM, Durable Goods Orders for February from the Census Bureau. The consensus is for a 0.7% decrease in durable goods orders.

by Calculated Risk on 3/25/2025 04:27:00 PM

From WardsAuto: U.S. Light-Vehicle Sales Heading for Long-Time-High Gain in March (pay content).  Brief excerpt:

Deliveries appear to have accelerated sharply in the middle of the month, creating momentum that could cause sales to overshoot the forecast. Conversely, overall inventory is relatively lean – and could atypically decline at the end of March from February - so the acceleration could slow before the end of the month after enough stock is pulled from dealer lots.
emphasis added

Click on graph for larger image.

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

On a seasonally adjusted annual rate basis, the Wards forecast of 16.6 million SAAR, would be up 3.8% from last month, and up 5.9% from a year ago.