by Calculated Risk on 6/30/2021 12:14:00 PM

Here is another monthly update on framing lumber prices.  

This graph shows CME framing futures through June 30th.

Lumber is currently at $722 per 1000 board feet.  

This is down from a peak of $1,733, but up from $448 a year ago.

Click on graph for larger image in graph gallery.

Lumber price are up 60% year-over-year.

There are supply constraints, for example, sawmills cut production and inventory at the beginning of the pandemic, and the West Coast fires in 2020 damaged privately-owned timberland.  

The supply constraints are easing.

And there has been a huge surge in demand for lumber.

by Calculated Risk on 6/30/2021 09:55:00 AM

From the NAR: Pending Home Sales Bounce Back 8.0% in May

Pending home sales rebounded strongly in May, reaching the highest reading ever for the month of May since 2005, according to the National Association of Realtors®. All four U.S. regions registered both month-over-month increases and year-over-year gains for pending home sales contract transactions for the month of May.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 8.0% to 114.7 in May. Year-over-year, signings increased 13.1%. An index of 100 is equal to the level of contract activity in 2001.
...
The Northeast PHSI increased 15.5% to 98.5 in May, a 54.6% climb from a year ago. In the Midwest, the index grew 6.7% to 107.7 last month, up 7.8% from May 2020.

Pending home sales transactions in the South rose 4.9% to an index of 135.5 in May, up 6.1% from May 2020. The index in the West increased 10.9% in May to 102.0, up 12.5% from a year prior.
emphasis added

This was well above expectations of a 0.8% increase for this index. Note: Contract signings usually lead sales by about 45 to 60 days, so this would usually be for closed sales in June and July.

by Calculated Risk on 6/30/2021 08:19:00 AM

From ADP:

Private sector employment increased by 692,000 jobs from May to June according to the June ADP® National Employment ReportTM. Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by the ADP Research Institute® in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.

“The labor market recovery remains robust, with June closing out a strong second quarter of jobs growth,” said Nela Richardson, chief economist, ADP. “While payrolls are still nearly 7 million short of pre-COVID19 levels, job gains have totaled about 3 million since the beginning of 2021. Service providers, the hardest hit sector, continue to do the heavy lifting, with leisure and hospitality posting the strongest gain as businesses begin to reopen to full capacity across the country
emphasis added

This was above the consensus forecast of 600,000 for this report.

The BLS report will be released Friday, and the consensus is for 675 thousand non-farm payroll jobs added in June. The ADP report has not been very useful in predicting the BLS report.

by Calculated Risk on 6/30/2021 07:00:00 AM

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

Mortgage applications decreased 6.9 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending June 25, 2021.

... The Refinance Index decreased 8 percent from the previous week and was 15 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 5 percent from one week earlier. The unadjusted Purchase Index decreased 6 percent compared with the previous week and was 17 percent lower than the same week one year ago.

“Mortgage application volume fell to the lowest level in almost a year and a half, with declines in both refinance and purchase applications. Mortgage rates were volatile last week, as investors tried to gauge upcoming moves by the Federal Reserve amidst several divergent signals, including rising inflation, mixed job market data, strong consumer spending, and a supply-constrained housing market that has led to rapid home-price growth,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Purchase applications for conventional loans declined last week to the lowest level since last May. The average loan size for total purchase applications increased, indicating that first-time homebuyers, who typically get smaller loans, are likely getting squeezed out of the market due to the lack of entry-level homes for sale.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) increased to 3.20 percent from 3.18 percent, with points decreasing to 0.39 from 0.48 (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 refinance index since 1990.

With low rates, the index remains elevated.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 17% year-over-year unadjusted.

Note: The year ago comparisons for the unadjusted purchase index are now more difficult since purchase activity picked up in late May 2020.

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

by Calculated Risk on 6/29/2021 09:00:00 PM

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

• At 8:15 AM, The ADP Employment Report for June. This report is for private payrolls only (no government). The consensus is for 600,000 payroll jobs added in June, down from 978,000 lost in May.

• At 9:45 AM, Chicago Purchasing Managers Index for June.

• At 10:00 AM, Pending Home Sales Index for May. The consensus is for a 0.8% increase in the index.

by Calculated Risk on 6/29/2021 05:32:00 PM

The Case-Shiller house price indexes for April were released today. Zillow forecasts Case-Shiller a month early, and I like to check the Zillow forecasts since they have been pretty close.

From Matthew Speakman at Zillow: April 2021 Case-Shiller Results & Forecast: No Sign of Slowing

Mortgage rates remain near historic lows, a demographic wave of households aging into prime homeownership years continues to swell, and despite showing some signs of bottoming, the number of available homes for sale remains historically small, particularly given the elevated demand for housing. Prices have skyrocketed as a result, and price growth continues to set new record highs. What’s more, despite sharply rising prices, demand for homes remains very strong. Bidding wars for the relatively few houses available remain common and homes are going under contract at an increasingly fast pace. Inventory upticks in recent weeks suggest that a respite from these red-hot market conditions may be starting to form. But a return to a balanced market remains a long way off, and there are few, if any, signs that home price appreciation will start to subside anytime soon.

Monthly and annual growth in May as reported by Case-Shiller is expected to accelerate from April and Mary 2020 in all three main indices. S&P Dow Jones Indices is expected to release data for the May S&P CoreLogic Case-Shiller Indices on Tuesday, July 27.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 16.2% in May, up from 14.6% in April.

The Zillow forecast is for the 20-City index to be up 16.5% YoY in April from 14.9% in April, and for the 10-City index to increase to be up 16.1% YoY compared to 14.4% YoY in April.

by Calculated Risk on 6/29/2021 03:36:00 PM

This data is from the CDC.

According to the CDC, on Vaccinations.

Total doses administered: 325,152,847, as of a week ago 319,223,844. Average doses last week: 0.85 million per day.

COVID Metrics
	Today	Yesterday	Week Ago	Goal
Percent over 18, One Dose	66.2%	66.1%	65.5%	≥70.0%1,2
Fully Vaccinated (millions)	154.2	153.8	150.4	≥1601
New Cases per Day3,4🚩	11,707	11,817	11,344	≤5,0002
Hospitalized3	11,837	11,287	12,633	≤3,0002
Deaths per Day3,4🚩	286	312	284	≤502
1 America's Goal by July 4th, 2my goals to stop daily posts, 37 day average for Cases, Hospitalized, and Deaths 4Cases and Deaths updated Mon - Fri 🚩 Increasing week-over-week

KUDOS to the residents of the 16 states and D.C. that have already achieved the 70% goal: Vermont, Hawaii and Massachusetts are at 80%+, and Connecticut, Maine, New Jersey,  Rhode Island, Pennsylvania, New Mexico, Maryland, California, Washington, New Hampshire, New York, Illinois, Virginia and D.C. are all over 70%.

Next up are Delaware at 69.8%, Minnesota at 69.7%, Colorado at 69.6%, Oregon at 69.4%, Wisconsin at 65.2%, Nebraska at 65.1%, and Florida at 64.3%.

Click on graph for larger image.

This graph shows the daily (columns) and 7 day average (line) of positive tests reported.

This data is from the CDC.

by Calculated Risk on 6/29/2021 12:42:00 PM

Watching existing home "for sale" inventory is very helpful. As an example, the increase in inventory in late 2005 helped me call the top for housing.

And the decrease in inventory eventually helped me correctly call the bottom for house prices in early 2012, see: The Housing Bottom is Here.

And in 2015, it appeared the inventory build in several markets was ending, and that boosted price increases.  

In 2020, with the pandemic, inventory dropped to record lows, and prices really increased (record low mortgage rates and demographics were factors too).

I don't have a crystal ball, but watching inventory helps understand the housing market.

Click on graph for larger image.

This graph below shows existing home months-of-supply (inverted, from the NAR) vs. the seasonally adjusted month-to-month price change in the Case-Shiller National Index (both since January 1999 through March 2021).

There is a clear relationship, and this is no surprise (but interesting to graph).  If months-of-supply is high, prices decline. If months-of-supply is very low (like now), prices rise quickly.

In April, the months-of-supply was at 2.4 months, and the Case-Shiller National Index (SA) increased 1.6% month-over-month (a month-over-month record).  The black arrow points to the April dot.

In the May existing home sales report released last week, the NAR reported months-of-supply increased to 2.5 month in May. There is a seasonal pattern to inventory, but this is still very low - and prices are increasing sharply.

by Calculated Risk on 6/29/2021 10:48:00 AM

Here is the post earlier on Case-Shiller: Case-Shiller: National House Price Index increased 14.6% year-over-year in April

It has been fifteen years since the bubble peak. In the Case-Shiller release today, the seasonally adjusted National Index (SA), was reported as being 35% above the previous bubble peak. However, in real terms, the National index (SA) is about 5% above the bubble peak (and historically there has been an upward slope to real house prices).  The composite 20, in real terms, is still 3% below the bubble peak.

The year-over-year growth in prices increased to 14.6% nationally.

Usually people graph nominal house prices, but it is also important to look at prices in real terms (inflation adjusted).  Case-Shiller and others report nominal house prices.  As an example, if a house price was $200,000 in January 2000, the price would be over $301,000 today adjusted for inflation (50%).  That is why the second graph below is important - this shows "real" prices (adjusted for inflation).

Nominal House Prices

The first graph shows the monthly Case-Shiller National Index SA, and the monthly Case-Shiller Composite 20 SA (through April) in nominal terms as reported.

In nominal terms, the Case-Shiller National index (SA) and the Case-Shiller Composite 20 Index (SA) are both at new all times highs (above the bubble peak).



Real House Prices

The second graph shows the same two indexes in real terms (adjusted for inflation using CPI less Shelter). Note: some people use other inflation measures to adjust for real prices.

In real terms, the National index is 5% above the bubble peak, and the Composite 20 index is back to late-2005.

In real terms, house prices are close to previous peak  levels.

Note that inflation was negative for a few months last year, and that also boosted real prices.

Price-to-Rent

In October 2004, Fed economist John Krainer and researcher Chishen Wei wrote a Fed letter on price to rent ratios: House Prices and Fundamental Value. Kainer and Wei presented a price-to-rent ratio using the OFHEO house price index and the Owners' Equivalent Rent (OER) from the BLS.

Here is a similar graph using the Case-Shiller National and Composite 20 House Price Indexes.

This graph shows the price to rent ratio (January 2000 = 1.0). The price-to-rent ratio had been moving more sideways, but picked up significantly recently.

On a price-to-rent basis, the Case-Shiller National index is back to April 2005 levels, and the Composite 20 index is back to October 2004 levels.

In real terms, prices are close to 2005 peak levels, and the price-to-rent ratio is back to late 2004, early 2005.

by Calculated Risk on 6/29/2021 09:10:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for April ("April" is a 3 month average of February, March and April prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P: S&P Corelogic Case-Shiller Index Shows Annual Home Price Gains Surged to 14.6% In April

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 14.6% annual gain in April, up from 13.3% in the previous month. The 10-City Composite annual increase came in at 14.4%, up from 12.9% in the previous month. The 20-City Composite posted a 14.9% year-over-year gain, up from 13.4% in the previous month.

Phoenix, San Diego, and Seattle reported the highest year-over-year gains among the 20 cities in April. Phoenix led the way with a 22.3% year-over-year price increase, followed by San Diego with a 21.6% increase and Seattle with a 20.2% increase. All 20 cities reported higher price increases in the year ending April 2021 versus the year ending March 2021.
...
Before seasonal adjustment, the U.S. National Index posted a 2.1% month-over-month increase, while the 10-City and 20-City Composites both posted increases of 1.9% and 2.1% respectively in April.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 1.6%, and the 10-City and 20-City Composites both posted increases of 1.4% and 1.6% respectively. In April, all 20 cities reported increases before and after seasonal adjustments.

“Housing prices accelerated their surge in April 2021,” says Craig J. Lazzara, Managing Director and Global Head of Index Investment Strategy at S&P DJI. “The National Composite Index marked its eleventh consecutive month of accelerating prices with a 14.6% gain from year-ago levels, up from 13.3% in March. This acceleration is also reflected in the 10- and 20-City Composites (up 14.4% and 14.9%, respectively). The market’s strength is broadly-based: all 20 cities rose, and all 20 gained more in the 12 months ended in April than they had gained in the 12 months ended in March.

“April’s performance was truly extraordinary. The 14.6% gain in the National Composite is literally the highest reading in more than 30 years of S&P CoreLogic Case-Shiller data. Housing prices in all 20 cities rose; price gains in all 20 cities accelerated; price gains in all 20 cities were in the top quartile of historical performance. In 15 cities, price gains were in top decile. Five cities – Charlotte, Cleveland, Dallas, Denver, and Seattle – joined the National Composite in recording their all-time highest 12- month gains.

“We have previously suggested that the strength in the U.S. housing market is being driven in part by reaction to the COVID pandemic, as potential buyers move from urban apartments to suburban homes. April’s data continue to be consistent with this hypothesis. This demand surge may simply represent an acceleration of purchases that would have occurred anyway over the next several years. Alternatively, there may have been a secular change in locational preferences, leading to a permanent shift in the demand curve for housing. More time and data will be required to analyze this question
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 1.4% in April (SA) from March.

The Composite 20 index is up 1.6% (SA) in April.

The National index is 35% above the bubble peak (SA), and up 1.6% (SA) in April.  The National index is up 80% from the post-bubble low set in February 2012 (SA).

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is up 14.4% compared to April 2020.  The Composite 20 SA is up 14.9% year-over-year.

The National index SA is up 14.6% year-over-year.

Price increases were above expectations.  I'll have more later.