by Calculated Risk on 9/01/2021 12:11:00 PM

The Case-Shiller house price indexes for June were released yesterday. 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: June 2021 Case-Shiller Results & Forecast: Hot Growth Summer

The slow rise in inventory that marked the beginning of summer wasn’t enough to cool the sizzling market, with the already rapidly rising Case-Shiller indices hitting the gas accelerating into the middle of the year instead of tapping the brakes.

The national Case-Shiller Home Price Index rose 18.6% year-over-year in June. Annual growth in the smaller 20-city composite index exceeded the national pace (19.1%) and annual growth in the 10-city index (18.5%) almost matched national appreciation. The annual rate of growth was faster in June than in May in all three main indices. On a monthly (seasonally adjusted) basis, the national index was up 1.8% from May, while the 10- and 20-city indices were up 1.6% and 1.8% month-over-month, respectively.
...
Demand for housing continues to far outweigh the supply of homes for sale: Competition remains elevated, and homes are still going under contract more than a week faster than they were a year ago. But despite the enduring market competition, more-recent data indicate that the scalding hot housing market may have cooled slightly in recent weeks. The number of for-sale homes has risen meaningfully since the early spring and the increased listings have appeared to bring some balance back to the market. Sales volumes that were falling sequentially in the spring have recently leveled off and price growth has simultaneously softened. All told, home price growth remains sky high, but more signals are appearing that the housing market is likely to soon start coming back to earth.

Monthly and annual growth in July as reported by Case-Shiller is expected to accelerate from June and May 2020 in all three main indices. S&P Dow Jones Indices is expected to release data for the June S&P CoreLogic Case-Shiller Indices on Tuesday, September 28.
emphasis added

The Zillow forecast is for the year-over-year change for the Case-Shiller National index to be at 20.1% in July, from 18.6% in June.

The Zillow forecast is for the 20-City index to be up 20.3% YoY in July from 19.1% in June, and for the 10-City index to be up 19.5% YoY compared to 18.5% YoY in June.

by Calculated Risk on 9/01/2021 10:21:00 AM

From the Census Bureau reported that overall construction spending increased:

Construction spending during July 2021 was estimated at a seasonally adjusted annual rate of $1,568.8 billion, 0.3 percent above the revised June estimate of $1,563.4 billion. The July figure is 9.0 percent above the July 2020 estimate of $1,439.6 billion.
emphasis added

Private and public spending increased:

Spending on private construction was at a seasonally adjusted annual rate of $1,231.0 billion, 0.3 percent above the revised June estimate of $1,227.8 billion. ...

In July, the estimated seasonally adjusted annual rate of public construction spending was $337.8 billion, 0.7 percent above the revised June estimate of $335.6 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 spending is 14% above the bubble peak (in nominal terms - not adjusted for inflation).

Non-residential spending is 10% above the bubble era peak in January 2008 (nominal dollars), but has been weak recently.

Public construction spending is 4% above the peak in March 2009, and 29% above the austerity low in February 2014, but weak recently.

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

On a year-over-year basis, private residential construction spending is up 27.0%. Non-residential spending is down 3.6% year-over-year. Public spending is down 5.1% year-over-year.

Construction was considered an essential service in most areas and did not decline sharply like many other sectors, but some sectors of non-residential have been under pressure. For example, lodging is down 29.8% YoY, multi-retail down 3.4% YoY, and office down 6.1% YoY.

This was at consensus expectations of a 0.3% increase in spending, and construction spending for the previous two months was revised up slightly.

by Calculated Risk on 9/01/2021 10:04:00 AM

(Posted with permission). The ISM manufacturing index indicated expansion in August. The PMI® was at 59.9% in August, up from 59.5% in July. The employment index was at 49.0%, down from 52.9% last month, and the new orders index was at 66.7%, up from 64.9%.

From ISM: August 2021 Manufacturing ISM® Report On Business®

Economic activity in the manufacturing sector grew in August, with the overall economy notching a 15th consecutive month of growth, say the nation’s supply executives in the latest Manufacturing ISM® Report On Business®.

The report was issued today by Timothy R. Fiore, CPSM, C.P.M., Chair of the Institute for Supply Management® (ISM®) Manufacturing Business Survey Committee:

“The August Manufacturing PMI® registered 59.9 percent, an increase of 0.4 percentage point from the July reading of 59.5 percent. This figure indicates expansion in the overall economy for the 15th month in a row after contraction in April 2020. The New Orders Index registered 66.7 percent, increasing 1.8 percentage points from the July reading of 64.9 percent. The Production Index registered 60 percent, an increase of 1.6 percentage points compared to the July reading of 58.4 percent. The Prices Index registered 79.4 percent, down 6.3 percentage points compared to the July figure of 85.7 percent; this is its first reading below 80 percent since December 2020 (77.6 percent). The Backlog of Orders Index registered 68.2 percent, 3.2 percentage points higher than the July reading of 65 percent. The Employment Index indicated contraction at 49 percent, 3.9 percentage points lower compared to the July reading of 52.9 percent. The Supplier Deliveries Index registered 69.5 percent, down 3 percentage points from the July figure of 72.5 percent. The Inventories Index registered 54.2 percent, 5.3 percentage points higher than the July reading of 48.9 percent. The New Export Orders Index registered 56.6 percent, an increase of 0.9 percentage point compared to the July reading of 55.7 percent. The Imports Index registered 54.3 percent, an 0.6-percentage point increase from the July reading of 53.7 percent.”
emphasis added

This was above expectations.

This suggests manufacturing expanded at a slightly faster pace in August than in July, but that employment contracted.

by Calculated Risk on 9/01/2021 08:20:00 AM

From ADP:

Private sector employment increased by 374,000 jobs from July to August according to the August 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.

“Our data, which represents all workers on a company’s payroll, has highlighted a downshift in the labor market recovery. We have seen a decline in new hires, following significant job growth from the first half of the year,” said Nela Richardson, chief economist, ADP. “Despite the slowdown, job gains are approaching 4 million this year, yet still 7 million jobs short of pre-COVID-19 levels. Service providers continue to lead growth, although the Delta variant creates uncertainty for this sector. Job gains across company sizes grew in lockstep, with small businesses trailing a bit more than usual.”

Mark Zandi, chief economist of Moody’s Analytics, said, “The Delta variant of COVID-19 appears to have dented the job market recovery. Job growth remains strong, but well off the pace of recent months. Job growth remains inextricably tied to the path of the pandemic.
emphasis added

This was well below the consensus forecast of 638,000 for this report.

The BLS report will be released Friday, and the consensus is for 728 thousand non-farm payroll jobs added in August. The ADP report has not been very useful in predicting the BLS report.

by Calculated Risk on 9/01/2021 07:00:00 AM

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

Mortgage applications decreased 2.4 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending August 27, 2021.

... The Refinance Index decreased 4 percent from the previous week and was 2 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 decreased 2 percent compared with the previous week and was 16 percent lower than the same week one year ago.

“There was little change in mortgage rates last week, with the 30-year fixed remaining at 3.03 percent. Despite low rates, refinance applications declined, with some borrowers still waiting for rates to drop even lower. Recent uncertainty around the economy and pandemic have kept rates low over the past month, which is why the refinance index has oscillated around these levels,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “Even with a slight increase, purchase activity hit its highest level since early July, as applications for conventional and government loans increased. Home purchase activity continues to be dominated by higher price tiers of the market, with the purchase average loan size now at $396,500, the highest average in five weeks. According to FHFA, June's yearover-year increase in home prices was 18.8 percent, while the second quarter saw a 17.4 percent increase overall. Both measures set new records, as housing demand continued to outpace the inventory of homes for sale.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($548,250 or less) remained unchanged at 3.03 percent, with points increasing to 0.34 from 0.29 (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 16% year-over-year unadjusted.

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

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

by Calculated Risk on 8/31/2021 08:23:00 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 August. This report is for private payrolls only (no government). The consensus is for 638,000 payroll jobs added in August, up from 330,000 added in July.

• At 10:00 AM, ISM Manufacturing Index for August. The consensus is for the ISM to be at 58.5, down from 59.5 in July.

• At 10:00 AM, Construction Spending for July. The consensus is for a 0.3% increase in construction spending.

• Late, Light vehicle sales for August. The consensus is for light vehicle sales to be 15.0 million SAAR in August, up from 14.75 million in July (Seasonally Adjusted Annual Rate).

by Calculated Risk on 8/31/2021 07:04:00 PM

Freddie Mac reported that the Single-Family serious delinquency rate in July was 1.74%, down from 1.86% in June. Freddie's rate is down year-over-year from 3.12% in July 2020.

Freddie's serious delinquency rate peaked in February 2010 at 4.20% following the housing bubble, and peaked at 3.17% in August 2020 during the pandemic.

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

Click on graph for larger image

Mortgages in forbearance are being counted as delinquent in this monthly report, but they will not be reported to the credit bureaus.

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once (if) they are employed.

Also - for multifamily - delinquencies were at 0.15%, unchanged from 0.15% in June, and down from the peak of 0.20% in April 2021.

by Calculated Risk on 8/31/2021 04:21:00 PM

Fannie Mae reported that the Single-Family Serious Delinquency decreased to 1.94% in July, from 2.08% in June. The serious delinquency rate is down from 3.24% in July 2020.

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), 4.82% are seriously delinquent (down from 5.04% in June). For loans made in 2005 through 2008 (2% of portfolio), 8.26% are seriously delinquent (down from 8.75%), For recent loans, originated in 2009 through 2021 (97% of portfolio), 1.57% are seriously delinquent (down from 1.69%). So Fannie is still working through a few poor performing loans from the bubble years.

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

This is very different from the increase in delinquencies following the housing bubble.   Lending standards have been fairly solid over the last decade, and most of these homeowners have equity in their homes - and they will be able to restructure their loans once they are employed.

by Calculated Risk on 8/31/2021 03:26:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 370,212,027, as of a week ago 363,915,792. Average doses last week: 0.90 million per day. 

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	52.4%	51.6%	≥70.0%1
Fully Vaccinated (millions)	174.1	171.4	≥2321
New Cases per Day3	149,263	145,423	≤5,0002
Hospitalized3🚩	90,279	85,350	≤3,0002
Deaths per Day3🚩	985	883	≤502
1 Minimum to achieve "herd immunity" (estimated between 70% and 85%). 2my goals to stop daily posts, 37 day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7 day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

IMPORTANT: For "herd immunity" most experts believe we need 70% to 85% of the total population fully vaccinated (or already had COVID).  

KUDOS to the residents of the 10 states that have achieved 60% of total population fully vaccinated: Vermont at 67.9%, Massachusetts, Maine, Connecticut, Rhode Island, Maryland. New Jersey, Washington, New York, New Mexico at 60.0%.

The following 14 states and D.C. have between 50% and 59.9% fully vaccinated:  New Hampshire at 59.7%, Oregon, District of Columbia, Virginia, Colorado, Minnesota, California, Hawaii, Delaware, Pennsylvania, Wisconsin, Florida, Nebraska, Iowa, Illinois, and Michigan at 50.5%.

Next up (total population, fully vaccinated according to CDC) are South Dakota at 49.1%, Kentucky at 48.5%, Ohio at 48.4%, Kansas at 48.3%, Arizona at 47.9%, Nevada at 47.8%, Utah at 47.5%, Texas at 47.4% and Alaska at 47.2%.

Click on graph for larger image.

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

by Calculated Risk on 8/31/2021 01:26:00 PM

New newsletter article: House Prices Increase Sharply in June

I've started a newsletter focused solely on real estate.  This newsletter will be ad free.

The current article discusses existing home inventory (a key topic this year).

This newsletter will usually be published several times a week, and will provide more in-depth analysis of the housing market.  

The blog will continue as always!

You can subscribe at https://calculatedrisk.substack.com/ (Currently all content is available for free, but please subscribe).