by Calculated Risk on 8/04/2022 01:13:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Denver Real Estate in July: Sales Off 31.6% YoY, Inventory Up 81.5%

A brief excerpt:

Every month I track about 35 local housing markets in the US, and I usually post several markets at a time. But this is worth noting. Sales in Denver were off almost 32% year-over-year in July, compared to down 23.6% in June. This early reporting market suggests existing home sales will be even weaker in July than in June.
...
From the DMAR: DMAR Real Estate Market Trends Report

The data confirms that the Denver Metro area is no longer in a shifting market. Instead, it has shifted, and the real estate market is more balanced. …

Every indicator points to the market shifting closer to a buyer’s market ....

DMAR reports total residential active inventory (detached and attached) was 7,361 at the end of July, up 21.5% from 6,057 at the end of June, and up 81.5% year-over-year from 4,056 in July 2021.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 8/04/2022 11:01:00 AM

On Friday at 8:30 AM ET, the BLS will release the employment report for July. The consensus is for 250,000 jobs added, and for the unemployment rate to be unchanged at 3.6%.

There were 372,000 jobs added in June, and the unemployment rate was at 3.6%.

Click on graph for larger image.

• First, currently there are still about 500 thousand fewer jobs than in February 2020 (the month before the pandemic).

This graph shows the job losses from the start of the employment recession, in percentage terms.

The current employment recession was by far the worst recession since WWII in percentage terms. However, the current employment recession, 28 months after the onset, has recovered quicker than the previous two recessions.

• ADP Report: The ADP employment report has been "paused" and is being retooled.

• ISM Surveys: Note that the ISM services are diffusion indexes based on the number of firms hiring (not the number of hires).  The ISM® manufacturing employment index decreased in July to 49.9%, up from 47.3% last month.   This would suggest about 20,000 jobs lost in manufacturing.

The ISM® services employment index increased in July to 49.1%, up from 47.4% last month.   This would suggest service employment was increased about 50,000 in July.

Combined, the ISM surveys suggest only 30,000 jobs added in July.

• Unemployment Claims: The weekly claims report showed an increase in the number of initial unemployment claims during the reference week (includes the 12th of the month) from 233,000 in June to 261,000 in July. This would usually suggest a few more layoffs in June than in May. In general, weekly claims were above expectations in July.

•  COVID: As far as the pandemic, the number of daily cases during the reference week in June was around 125,000, up from 105,000 in June.  

• Conclusion: The consensus is for job growth to slow to 250,000 jobs added in July.  Overall, the ISM surveys improved, but still suggested few jobs added in July.  Unemployment claims increased during the reference week.   This suggests a weaker than expected employment report for July.

by Calculated Risk on 8/04/2022 08:49:00 AM

From the Department of Commerce reported:

The U.S. Census Bureau and the U.S. Bureau of Economic Analysis announced today that the goods and services deficit was $79.6 billion in June, down $5.3 billion from $84.9 billion in May, revised.

June exports were $260.8 billion, $4.3 billion more than May exports. June imports were $340.4 billion, $1.0 billion less than May imports.
emphasis added

Click on graph for larger image.

Exports increased and imports decreased in June.

Exports are up 23% year-over-year; imports are up 20% year-over-year.

Both imports and exports decreased sharply due to COVID-19, and have now bounced back.

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, imports and exports of petroleum products are close to zero.

The trade deficit with China increased to $36.9 billion in June, from $27.7 billion a year ago.

The trade deficit was lower than the consensus forecast, and the deficit for May was revised down.

by Calculated Risk on 8/04/2022 08:37:00 AM

The DOL reported:

In the week ending July 30, the advance figure for seasonally adjusted initial claims was 260,000, an increase of 6,000 from the previous week's revised level. The previous week's level was revised down by 2,000 from 256,000 to 254,000. The 4-week moving average was 254,750, an increase of 6,000 from the previous week's revised average. The previous week's average was revised down by 500 from 249,250 to 248,750.
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 increased to 254,750.

The previous week was revised down.

Weekly claims were lower than the consensus forecast.

by Calculated Risk on 8/03/2022 09:17:00 PM

Wednesday:
• At 8:30 AM ET, Trade Balance report for June from the Census Bureau. The consensus is the trade deficit to be $80.1 billion.  The U.S. trade deficit was at $85.5 Billion the previous month.

• Also at 8:30 AM, The initial weekly unemployment claims report will be released.  The consensus is for 265 thousand up from 256 thousand last week.

On COVID (focus on hospitalizations and deaths):

Hospitalizations have almost quadrupled from the lows in April 2022.

COVID Metrics
	Now	Week Ago	Goal
New Cases per Day2	119,034	126,812	≤5,0001
Hospitalized2	37,132	37,286	≤3,0001
Deaths per Day2	387	396	≤501
1my goals to stop daily posts, 27-day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7-day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

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

Average daily deaths bottomed in July 2021 at 214 per day.

by Calculated Risk on 8/03/2022 02:28:00 PM

The BEA released their estimate of vehicle sales for July this morning.

This graph shows heavy truck sales since 1967 using data from the BEA. The dashed line is the July 2022 seasonally adjusted annual sales rate (SAAR).

Heavy truck sales really collapsed during the great recession, falling to a low of 180 thousand SAAR in May 2009.  Then heavy truck sales increased to a new all-time high of 570 thousand SAAR in April 2019.

Click on graph for larger image.

Note: "Heavy trucks - trucks more than 14,000 pounds gross vehicle weight."

Heavy truck sales declined sharply at the beginning of the pandemic, falling to a low of 308 thousand SAAR in May 2020.  

Heavy truck sales were at 477 thousand SAAR in July, up from 470 thousand in June, and up from 440 thousand SAAR in July 2021.  

Usually, heavy truck sales decline sharply prior to a recession.   Sales were solid in July.

by Calculated Risk on 8/03/2022 11:54:00 AM

Today, in the Calculated Risk Real Estate Newsletter: How Much will the Fannie & Freddie Conforming Loan Limit Increase for 2023?

A brief excerpt:

With house prices up sharply again over the last year, an interesting question is: How much will the Fannie & Freddie conforming loan limits (CLL) increase for 2023? And how much will the FHA insured loan limits increase?

First, there are different loan limits for various geographical areas. There are also different loan limits depending on the number of units (from 1 to 4 units). For example, currently the CLL is $647,200 for one-unit properties in low-cost areas. For Los Angeles County, the CLL is $970,800 for one-unit properties (50% higher than the baseline CLL).
...
This graph shows the CLL since 1979. The CLL was unchanged from 2006 though 2016.
...
The adjustment is based on the House Price Index value in Q3 divided by Q3 in the prior year. The FHFA index is a repeat sales index, similar to Case-Shiller.
...
Currently we only have data for Q1 2022 for the quarterly index (up 17.5% from Q1 2021), and the Purchase-Only index was up 18.3% through May 2022.
...
We need the house price data through September 2022 to calculate the conforming loan limit for 2023. This quarterly data will be released in late November.

Based on the current year-over-year house price change, the CLL could be close to $760,000 in 2023. However, year-over-year (YoY) house price growth is clearly slowing, and it is possible the CLL will be in the low-to-mid $700 thousand range for 2023.

There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/

by Calculated Risk on 8/03/2022 10:06:00 AM

(Posted with permission). The ISM® Services index was at 56.7%, up from 55.3% last month. The employment index increased to 49.1%, from 47.4%. Note: Above 50 indicates expansion, below 50 in contraction.

From the Institute for Supply Management: Services PMI® at 56.7% July 2022 Services ISM® Report On Business®

Economic activity in the services sector grew in July for the 26th month in a row — with the Services PMI® registering 56.7 percent — say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In July, the Services PMI® registered 56.7 percent, 1.4 percentage points higher than June’s reading of 55.3 percent. The Business Activity Index registered 59.9 percent, an increase of 3.8 percentage points compared to the reading of 56.1 percent in June. The New Orders Index figure of 59.9 percent is 4.3 percentage points higher than the June reading of 55.6 percent.
...
The Employment Index (49.1 percent) contracted for the second consecutive month ...
emphasis added

This was well above expectations.

by Calculated Risk on 8/03/2022 07:00:00 AM

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

— Mortgage applications increased 1.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending July 29, 2022.

... The Refinance Index increased 2 percent from the previous week and was 82 percent lower 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 16 percent lower than the same week one year ago.

“Mortgage rates declined last week following another announcement of tighter monetary policy from the Federal Reserve, with the likelihood of more rate hikes to come. Treasury yields dropped as a result, as investors continue to expect a weaker macroeconomic environment in the coming months. The 30-year fixed rate saw the largest weekly decline since 2020, falling 31 basis points to 5.43 percent,” said Joel Kan, MBA’s Associate Vice President of Economic and Industry Forecasting. “The drop in rates led to increases in both refinance and purchase applications, but compared to a year ago, activity is still depressed. Lower mortgage rates, combined with signs of more inventory coming to the market, could lead to a rebound in purchase activity.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 5.43 percent from 5.74 percent, with points increasing to 0.65 from 0.61 (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 higher mortgage rates, the refinance index has declined sharply over the last several months.

The refinance index is just above the lowest level since the year 2000.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 16% year-over-year unadjusted.

The purchase index is now only 14% above the pandemic low.

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

by Calculated Risk on 8/02/2022 11:56:00 PM

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

• At 10:00 AM, the ISM Services Index for July.   The consensus is for a reading of 53.5, down from 55.3.

On COVID (focus on hospitalizations and deaths):

Hospitalizations have almost quadrupled from the lows in April 2022.

COVID Metrics
	Now	Week Ago	Goal
New Cases per Day2	114,021	127,727	≤5,0001
Hospitalized2	36,835	37,034	≤3,0001
Deaths per Day2	357	415	≤501
1my goals to stop daily posts, 27-day average for Cases, Currently Hospitalized, and Deaths 🚩 Increasing 7-day average week-over-week for Cases, Hospitalized, and Deaths ✅ Goal met.

Click on graph for larger image.

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

Average daily deaths bottomed in July 2021 at 214 per day.