by Calculated Risk on 11/02/2021 09:00:00 PM

Here is my FOMC Preview: Taper Announcement Expected.

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 October. This report is for private payrolls only (no government).  The consensus is for 400,000 jobs added, down from 568,000 in September.

• At 10:00 AM, the ISM Services Index for October.  The consensus is for a decrease to 59.5 from 61.9.

• At 2:00 PM, FOMC Meeting Announcement. The FOMC is expected to announce tapering of asset purchases at this meeting.

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

by Calculated Risk on 11/02/2021 06:29:00 PM

Wards Auto released their estimate of light vehicle sales for October. Wards Auto estimates sales of 12.99 million SAAR in October 2021 (Seasonally Adjusted Annual Rate), up 6.8% from the September sales rate, and down 20.8% from October 2020. 

This was well above the consensus estimate of 12.4 million SAAR.

Click on graph for larger image.

This graph shows light vehicle sales since 2006 from the BEA (blue) and Wards Auto's estimate for October (red).

The impact of COVID-19 was significant, and April 2020 was the worst month.

After April 2020, sales increased, and were close to sales in 2019 (the year before the pandemic).  

However, sales decreased earlier this year due to supply issues. It appears the "supply chain bottom" was in September.

by Calculated Risk on 11/02/2021 05:35:00 PM

The BEA released the underlying details for the Q3 advance GDP report on Friday.

The BEA reported that investment in non-residential structures increased at a 2.4% annual pace in Q3. Note that weakness in non-residential structures started in 2019, before the pandemic.  

Investment in petroleum and natural gas structures increased sharply in Q3 compared to Q2, and was up 67% year-over-year.   

Click on graph for larger image.

The first graph shows investment in offices, malls and lodging as a percent of GDP.

Investment in offices (blue) increased slightly in Q3, and was down 4.9% year-over-year.

Investment in multimerchandise shopping structures (malls) peaked in 2007 and was down about 2% year-over-year in Q3 - and near a record low as a percent of GDP.   The vacancy rate for malls is still very high, so investment will probably stay low for some time.

Lodging investment decreased slightly in Q3 compared to Q2, and lodging investment was down 29% year-over-year.

All three sectors - offices, malls, and hotels - are being hurt significantly by the pandemic.

The second graph is for Residential investment components as a percent of GDP. According to the Bureau of Economic Analysis, RI includes new single family structures, multifamily structures, home improvement, Brokers’ commissions and other ownership transfer costs, and a few minor categories (dormitories, manufactured homes).

Even though investment in single family structures has increased from the bottom, single family investment is just approaching normal levels as a percent of GDP.

Investment in single family structures was $411 billion (SAAR) (about 1.8% of GDP), and up 38% year-over-year.

Investment in multi-family structures decreased slightly in Q3.

Investment in home improvement was at a $324 billion Seasonally Adjusted Annual Rate (SAAR) in Q2 (about 1.4% of GDP).  Home improvement spending has been strong during the pandemic.

Note that Brokers' commissions (black) increased sharply last year as existing home sales increased in the second half of 2020, but was down in Q2 and Q3.   Brokers' commissions were up 7% year-over-year in Q2.

by Calculated Risk on 11/02/2021 02:50:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 423,005,384, as of a week ago 414,302,192, or 1.24 million doses per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	58.0%	57.4%	≥70.0%1
Fully Vaccinated (millions)	192.6	190.7	≥2321
New Cases per Day3🚩	74,798	67,184	≤5,0002
Hospitalized3	42,186	47,283	≤3,0002
Deaths per Day3🚩	1,190	1,174	≤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).  Note: COVID will probably stay endemic (at least for some time).

KUDOS to the residents of the 4 states that have achieved 70% of total population fully vaccinated: Vermont at 71.3%, Rhode Island, Connecticut, and Maine at 70.6% .

KUDOS also to the residents of the 13 states and D.C. that have achieved 60% of total population fully vaccinated: Massachusetts at 69.7%, New York, New Jersey, Maryland, New Mexico, New Hampshire, Washington, Oregon, Virginia, District of Columbia,  Colorado, California, Pennsylvania, and Illinois at 60.5%.

The following 22 states have between 50% and 59.9% fully vaccinated: Minnesota at 59.9%, Delaware, Hawaii, Florida, Wisconsin, Nebraska, Iowa, Illinois, Michigan, Kentucky, South Dakota, Texas, Arizona, Kansas, Nevada, Alaska, Utah, North Carolina, Ohio, Montana, Oklahoma, and South Carolina at 50.1%.

Next up (total population, fully vaccinated according to CDC) are Indiana at 49.9%, Missouri at 49.8%, Georgia at 48.2%, and Arkansas at 48.1%.

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 11/02/2021 11:56:00 AM

Here is another monthly update on framing lumber prices.  

This graph shows CME random length framing futures through November 2nd.

Lumber was at $557 per 1000 board feet this morning.  

This is down from a peak of $1,733, and up $25 from a year ago.

Click on graph for larger image in graph gallery.

Lumber price are up 6% year-over-year.

There were supply constraints over the last year, for example, sawmills cut production and inventory at the beginning of the pandemic, and the West Coast fires in 2020 damaged privately-owned timberland (and maybe again in 2021).  

The supply constraints have eased somewhat.

And there was a huge surge in demand for lumber (demand remains strong).

by Calculated Risk on 11/02/2021 10:14:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q3 2021.

The results of this survey were significantly distorted by the pandemic in 2020.

This report is frequently mentioned by analysts and the media to track household formation, the homeownership rate, and the homeowner and rental vacancy rates.  However, there are serious questions about the accuracy of this survey.

This survey might show the trend, but I wouldn't rely on the absolute numbers. Analysts probably shouldn't use the HVS to estimate the excess vacant supply or household formation, or rely on the homeownership rate, except as a guide to the trend.

"National vacancy rates in the third quarter 2021 were 5.8 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate was 0.6 percentage points lower than the rate in the third quarter 2020 (6.4 percent) and 0.4 percentage points lower than the rate in the second quarter 2021 (6.2 percent).

The homeowner vacancy rate of 0.86 percent was lower than the rate in the third quarter 2020 (0.95 percent) and virtually the same as the rate in the second quarter 2021 (0.86 percent). (Note: the 0.86 percent and the 0.95 percent each round to 0.9 percent in the tables below).

The homeownership rate of 65.4 percent was 2.0 percentage points lower than the rate in the third quarter 2020 (67.4 percent) and virtually the same as the rate in the second quarter 2021 (65.4 percent). "
emphasis added

Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st 1990, 2000 and 2010.  The Census Bureau will released data for 2020 soon.

The HVS homeownership rate was unchanged at 65.4% in Q3, from 65.4% in Q2.

The results starting in Q2 2020 were distorted by the pandemic.

The HVS homeowner vacancy was unchanged at 0.9% in Q3.

Once again - this probably shows the general trend, but I wouldn't rely on the absolute numbers.

The rental vacancy rate decreased to 5.8% in Q3 from 6.2% in Q2.  This fits with other data suggesting strong rental demand in Q3.

The quarterly HVS is the most timely survey on households, but there are many questions about the accuracy of this survey.

by Calculated Risk on 11/02/2021 08:00:00 AM

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: US Annual Home Price Growth Hits 18% in September as Supply and Demand Imbalances Intensify, CoreLogic Reports

CoreLogic® ... released the CoreLogic Home Price Index (HPI™) and HPI Forecast™ for September 2021.

Demand for homebuying remained strong through the end of the summer. However, the ongoing housing supply shortage has continued to drive up prices, which increased 18% year over year in September, to record highs creating additional challenges for entry into the homebuying market. High demand and low supply levels for entry-level homes, in particular, are sidelining many would-be first-time buyers.

As millennials continue to make up a large part of homebuying demand and flock to tech hubs like Seattle; San Jose, California and Austin, Texas, we may see this challenge intensify. This is reflected in a recent CoreLogic consumer survey, with 47.9% of this cohort stating they cannot afford to purchase a home in their preferred area.

“The pandemic led prospective buyers to seek detached homes in communities with lower population density, such as suburbs and exurbs,” said Frank Martell, president and CEO of CoreLogic. “As we head into 2022, we expect some moderation in the current pattern of flight away from urban cores as the pandemic wanes.”
...
Nationally, home prices increased 18% in September 2021, compared to September 2020. On a month-over-month basis, home prices increased by 1.1% compared to August 2021.
...
In September, appreciation of detached properties (19.6%) was 7.4 percentage points higher than that of attached properties (12.2%).
emphasis added

by Calculated Risk on 11/01/2021 09:02:00 PM

From Matthew Graham at Mortgage News Daily: Mortgage Rates Catch Up To Last Week's Market Movement (That's a Good Thing)

Mortgage rates moved moderately lower today despite an absence of significant movement in the bond market. In general, when bonds improve, rates fall (and vice versa), but it's not feasible for mortgage lenders to adjust their rates offerings in relative real-time as bonds can send massively mixed signals on any given day. [30 year fixed 3.18%]
emphasis added

Tuesday:
• At 8:00 AM ET, Corelogic House Price index for September.

• At 10:00 AM, The Q3 Housing Vacancies and Homeownership report from the Census Bureau.

• All day, Light vehicle sales for October. The consensus is for sales of 12.4 million SAAR, up from 12.2 million SAAR in September (Seasonally Adjusted Annual Rate).

by Calculated Risk on 11/01/2021 04:00:00 PM

Note: This is as of October 24th.

From the MBA: Share of Mortgage Loans in Forbearance Decreases to 2.15%

The Mortgage Bankers Association’s (MBA) latest Forbearance and Call Volume Survey revealed that the total number of loans now in forbearance decreased by 6 basis points from 2.21% of servicers’ portfolio volume in the prior week to 2.15% as of October 24, 2021. According to MBA’s estimate, 1.1 million homeowners are in forbearance plans.

The share of Fannie Mae and Freddie Mac loans in forbearance decreased 3 basis points to 0.97%. Ginnie Mae loans in forbearance decreased 7 basis points to 2.65%, and the forbearance share for portfolio loans and private-label securities (PLS) declined 8 basis points to 5.13%. The percentage of loans in forbearance for independent mortgage bank (IMB) servicers decreased 6 basis points relative to the prior week to 2.43%, and the percentage of loans in forbearance for depository servicers decreased 4 basis points to 2.07%.

“For the first time since March 2020, the share of Fannie Mae and Freddie Mac loans in forbearance dropped below 1 percent. A small decline for this investor category was matched by similarly small declines for Ginnie Mae and portfolio/PLS loans,” said Mike Fratantoni, MBA’s Senior Vice President and Chief Economist. “Forbearance exits slowed at the end of October to the slowest pace since late August. With so many borrowers having reached the end of their 18-month forbearance term, we expect a steady pace of exits in November.”
emphasis added

Click on graph for larger image.

This graph shows the percent of portfolio in forbearance by investor type over time.  The number of forbearance plans is decreasing rapidly recently since many homeowners have reached the end of the 18-month term.

Some stats on exits:

Of the cumulative forbearance exits for the period from June 1, 2020, through October 24, 2021, at the time of forbearance exit:
• 29.1% resulted in a loan deferral/partial claim.
• 20.6% represented borrowers who continued to make their monthly payments during their forbearance period.
• 16.7% represented borrowers who did not make all of their monthly payments and exited forbearance without a loss mitigation plan in place yet.
• 13.1% resulted in a loan modification or trial loan modification.
• 12.0% resulted in reinstatements, in which past-due amounts are paid back when exiting forbearance.
• 7.1% resulted in loans paid off through either a refinance or by selling the home.
• The remaining 1.4% resulted in repayment plans, short sales, deed-in-lieus or other reasons.

by Calculated Risk on 11/01/2021 03:52:00 PM

The CDC is the source for all data.

According to the CDC, on Vaccinations.  Total doses administered: 422,070,099, as of a week ago 413,645,478, or 1.20 million doses per day.

COVID Metrics
	Today	Week Ago	Goal
Percent fully Vaccinated	58.0%	57.4%	≥70.0%1
Fully Vaccinated (millions)	192.5	190.6	≥2321
New Cases per Day3🚩	71,207	62,858	≤5,0002
Hospitalized3	41,287	47,878	≤3,0002
Deaths per Day3	1,151	1,196	≤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).  Note: COVID will probably stay endemic (at least for some time).

KUDOS to the residents of the 4 states that have achieved 70% of total population fully vaccinated: Vermont at 71.2%, Rhode Island, Connecticut, and Maine at 70.6% .

KUDOS also to the residents of the 13 states and D.C. that have achieved 60% of total population fully vaccinated: Massachusetts at 69.7%, New York, New Jersey, Maryland, New Mexico, New Hampshire, Washington, Oregon, Virginia, District of Columbia,  Colorado, California, Pennsylvania, and Illinois at 60.4%.

The following 22 states have between 50% and 59.9% fully vaccinated: Minnesota at 59.9%, Delaware, Hawaii, Florida, Wisconsin, Nebraska, Iowa, Illinois, Michigan, Kentucky, South Dakota, Texas, Arizona, Kansas, Nevada, Alaska, Utah, North Carolina, Ohio, Montana, Oklahoma, and South Carolina at 50.0%.

Next up (total population, fully vaccinated according to CDC) are Indiana at 49.9%, Missouri at 49.8%, Georgia at 48.2%, and Arkansas at 48.0%.

Click on graph for larger image.

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