by Calculated Risk on 8/12/2022 08:57:00 AM

With the pandemic, there was a surge in 2nd home buying.

I'm looking at data for some second home markets - and I'm tracking those markets to see if there is an impact from lending changes, rising mortgage rates or the easing of the pandemic.

This graph is for South Lake Tahoe since 2004 through July 2022, and shows inventory (blue), and the year-over-year (YoY) change in the median price (12-month average).

Note: The median price is distorted by the mix, but this is the available data.

Click on graph for larger image.

Following the housing bubble, prices declined for several years in South Lake Tahoe, with the median price falling about 50% from the bubble peak.

Currently inventory is still very low, but up almost 6-fold from the record low set in February 2022, and up 44% year-over-year.  Prices are up 9.9% YoY (but the YoY change has been trending down).

by Calculated Risk on 8/11/2022 03:59:00 PM

From CoStar: STR: US Weekly Occupancy Near 70%, but Still Behind Pre-Pandemic Level

Following seasonal patterns, U.S. hotel performance fell slightly from the previous week, according to STR‘s latest data through Aug. 6.

July 31 through Aug. 6, 2022 (percentage change from comparable week in 2019*):

• Occupancy: 69.9% (-5.7%)
• Average daily rate (ADR): $154.48 (+15.1%)
• Revenue per available room (RevPAR): $108.04 (+8.5%)

*Due to the pandemic impact, STR is measuring recovery against comparable time periods from 2019.
emphasis added

The following graph shows the seasonal pattern for the hotel occupancy rate using the four-week average.

Click on graph for larger image.

The red line is for 2022, black is 2020, blue is the median, and dashed light blue is for 2021.  Dashed purple is 2019 (STR is comparing to a strong year for hotels).

The 4-week average of the occupancy rate is just below the median rate for the previous 20 years (Blue).

Note: Y-axis doesn't start at zero to better show the seasonal change.

The 4-week average of the occupancy rate will peak in seasonally in a few weeks.

by Calculated Risk on 8/11/2022 12:33:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Current State of the Housing Market

A brief excerpt:

This is a market overview for mid-August.
...
The early local market reports for July show inventory up over 46% YoY for these markets! These same markets were up 20% YoY in May, so the NAR report for July will show further increases in inventory.

It is important to realize inventory is both increasing and still very low. Here is a graph from Realtor.com’s July Housing Trends Report. This shows their estimate of active inventory over the last six years. Currently inventory is rising, but still far below normal.

Since inventory was declining rapidly for most of 2020, and it is very likely that inventory will be up in August or September compared to 2020.
...
We are seeing a sharp slowdown in the housing market, with more price reductions, more inventory, and fewer sales. It will take some time to see the impact on house price growth, but that is coming too. However, inventory growth has slowed recently, and inventory is key for predicting house prices.

Next week, existing home sales will likely show a sharp year-over-year decline in sales for July - with sales below 5 million SAAR for the first time since the first few months of the pandemic. Housing starts will probably show further declines (and still a record number of homes under construction).

It is important to remember that housing is a key transmission mechanism for Federal Open Market Committee (FOMC) policy. As long as inflation remains elevated, the Fed will keep raising rates - and that will impact the housing market (although mortgage rates have already jumped in anticipation of the FOMC actions).

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

by Calculated Risk on 8/11/2022 10:45:00 AM

From the MBA: Mortgage Delinquencies Decrease in the Second Quarter of 2022

The delinquency rate for mortgage loans on one-to-four-unit residential properties decreased to a seasonally adjusted rate of 3.64 percent of all loans outstanding at the end of the second quarter of 2022, according to the Mortgage Bankers Association’s (MBA) National Delinquency Survey.

For the purposes of the survey, MBA asks servicers to report loans in forbearance as delinquent if the payment was not made based on the original terms of the mortgage. The delinquency rate was down 47 basis points from the first quarter of 2022 and down 183 basis points from one year ago.

“At 3.64 percent, the mortgage delinquency rate in the second quarter fell to its lowest level since MBA’s survey began in 1979 – even beating out the previous pre-pandemic, survey low of 3.77 percent in the fourth quarter of 2019,” said Marina Walsh, MBA’s Vice President of Industry Analysis. “Most of the improvement across all product types – FHA, VA, and conventional loans - resulted from a decline in the loans that were 90 days or more delinquent but not in the foreclosure process.”

According to Walsh, of all the economic indicators that can lead to mortgage delinquencies, the U.S. unemployment rate seems to be the best gauge of loan performance. Despite inflationary pressures, stock market volatility, increases in mortgage rates, and two quarters of economic contraction – often defined as a recession – the job market remains incredibly strong. The unemployment rate was 3.5 percent in July – a half-century low that tracks closely with the record-low mortgage delinquency rate.

Added Walsh, “Foreclosure inventory levels and foreclosure starts remain well below historical averages for the survey – a strong indication that servicers are able to help delinquent borrowers find alternatives to foreclosure. Such alternatives include curing, loan workouts, home sales - with possible equity to spare, or cash-for-keys and deed-in-lieu options.”
emphasis added

Click on graph for larger image.

This graph shows the percent of loans delinquent by days past due.  Overall delinquencies decreased in Q2 to a record low.

From the MBA:

Compared to last quarter, the seasonally adjusted mortgage delinquency rate decreased for all loans outstanding to 3.64 percent, the lowest level in the history of the survey dating back to 1979. By stage, the 30-day delinquency rate increased 7 basis points to 1.66 percent, the 60-day delinquency rate decreased 7 basis points to 0.49 percent, and the 90-day delinquency bucket decreased 47 basis points to 1.49 percent.
...
The delinquency rate includes loans that are at least one payment past due but does not include loans in the process of foreclosure. The percentage of loans in the foreclosure process at the end of the second quarter was 0.59 percent, up 6 basis points from the first quarter of 2022 and 8 basis points higher than one year ago. The foreclosure inventory rate remains below the quarterly average of 1.43 percent dating back to 1979.

This sharp increase in 2020 in the 90-day bucket was due to loans in forbearance (included as delinquent, but not reported to the credit bureaus).

The percent of loans in the foreclosure process increased in Q2 with the end of the foreclosure moratoriums.

by Calculated Risk on 8/11/2022 08:36:00 AM

The DOL reported:

In the week ending August 6, the advance figure for seasonally adjusted initial claims was 262,000, an increase of 14,000 from the previous week's revised level. The previous week's level was revised down by 12,000 from 260,000 to 248,000. The 4-week moving average was 252,000, an increase of 4,500 from the previous week's revised average. The previous week's average was revised down by 7,250 from 254,750 to 247,500.
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 252,000.

The previous week was revised down.

Weekly claims were at the consensus forecast.

by Calculated Risk on 8/10/2022 08:27:00 PM

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for 263 thousand up from 260 thousand last week.

• Also at 8:30 AM, The Producer Price Index for July from the BLS. The consensus is for a 0.3% increase in PPI, and a 0.4% increase in core PPI.

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	107,077	121,260	≤5,0001
Hospitalized2	36,663	37,632	≤3,0001
Deaths per Day2	395	422	≤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 8/10/2022 01:15:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Homebuyers Hit Brakes in July, Sellers Hold Back

A brief excerpt:

The big story for July existing home sales is the sharp year-over-year (YoY) decline in sales. Another key story is that new listings are down YoY in July. Of course, active listings are up sharply.
...
Notes for all tables:

1. New additions to table in BOLD.

2. Northwest (Seattle), Santa Clara (San Jose), Jacksonville, Source: Northeast Florida Association of REALTORS®

3. Totals do not include Atlanta, Denver (included in state totals)

And here is a table for new listings in July. For these areas, new listings were down 8.6% YoY.

Last month, new listings in these markets were up 3.9% YoY. Overall, we aren’t seeing a pickup in new listings in these markets. In most markets, new listings are down YoY.
...
Much more to come!

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

by Calculated Risk on 8/10/2022 11:13:00 AM

The Cleveland Fed released the median CPI and the trimmed-mean CPI this morning:

According to the Federal Reserve Bank of Cleveland, the median Consumer Price Index rose 0.5% in July. The 16% trimmed-mean Consumer Price Index increased 0.4% in July. "The median CPI and 16% trimmed-mean CPI are measures of core inflation calculated by the Federal Reserve Bank of Cleveland based on data released in the Bureau of Labor Statistics’ (BLS) monthly CPI report".

Note: The Cleveland Fed released the median CPI details here: "Motor Fuel" decreased at a 61% annualized rate in July!

Note that Owners' Equivalent Rent and Rent of Primary Residence account for almost 1/3 of median CPI, and these measures were up between 3% annualized in the Northeast and almost 11% in the South with an average of close to 7.5%. The year-over-year increase was smaller in July than in June.  

Click on graph for larger image.

This graph shows the year-over-year change for these four key measures of inflation. 

On a year-over-year basis, the median CPI rose 6.3%, the trimmed-mean CPI rose 7.0%, and the CPI less food and energy rose 5.9%. Core PCE is for June and increased 4.8% year-over-year.

by Calculated Risk on 8/10/2022 10:15:00 AM

The BLS reported this morning:

The Consumer Price Index for Urban Wage Earners and Clerical Workers (CPI-W) increased 9.1 percent over the last 12 months to an index level of 292.219 (1982-84=100). For the month, the index declined 0.1 percent prior to seasonal adjustment.

CPI-W is the index that is used to calculate the Cost-Of-Living Adjustments (COLA). The calculation dates have changed over time (see Cost-of-Living Adjustments), but the current calculation uses the average CPI-W for the three months in Q3 (July, August, September) and compares to the average for the highest previous average of Q3 months. Note: this is not the headline CPI-U and is not seasonally adjusted (NSA).

• In 2021, the Q3 average of CPI-W was 268.421.

The 2021 Q3 average was the highest Q3 average, so we only have to compare Q3 this year to last year.

Click on graph for larger image.

This graph shows CPI-W since January 2000. The red lines are the Q3 average of CPI-W for each year.

Note: The year labeled is for the calculation, and the adjustment is effective for December of that year (received by beneficiaries in January of the following year).

CPI-W was up 9.1% year-over-year in July, and although this is early - we need the data for July, August and September - my early guess is COLA will probably be around 8.5% to 9.0% this year, the largest increase since 11.2% in 1981 (and larger than the 7.4% increase in 1982).

Contribution and Benefit Base

The contribution base will be adjusted using the National Average Wage Index. This is based on a one-year lag. The National Average Wage Index is not available for 2021 yet, but wages probably increased again in 2021. If wages increased 4% in 2021, then the contribution base next year will increase to around $153,000 in 2023, from the current $147,000.

Remember - this is an early look. What matters is average CPI-W, NSA, for all three months in Q3 (July, August and September).

by Calculated Risk on 8/10/2022 08:32:00 AM

From the BLS:

The Consumer Price Index for All Urban Consumers (CPI-U) was unchanged in July on a seasonally adjusted basis after rising 1.3 percent in June, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 8.5 percent before seasonal adjustment.

The gasoline index fell 7.7 percent in July and offset increases in the food and shelter indexes, resulting in the all items index being unchanged over the month. The energy index fell 4.6 percent over the month as the indexes for gasoline and natural gas declined, but the index for electricity increased. The food index continued to rise, increasing 1.1 percent over the month as the food at home index rose 1.3 percent.

The index for all items less food and energy rose 0.3 percent in July, a smaller increase than in April, May, or June. The indexes for shelter, medical care, motor vehicle insurance, household furnishings and operations, new vehicles, and recreation were among those that increased over the month. There were some indexes that declined in July, including those for airline fares, used cars and trucks, communication, and apparel.

The all items index increased 8.5 percent for the 12 months ending July, a smaller figure than the 9.1-percent increase for the period ending June. The all items less food and energy index rose 5.9 percent over the last 12 months. The energy index increased 32.9 percent for the 12 months ending July, a smaller increase than the 41.6-percent increase for the period ending June. The food index increased 10.9 percent over the last year, the largest 12-month increase since the period ending May 1979.
emphasis added

The consensus was for 0.2% increase in CPI, and a 0.5% increase in core CPI. Both were below expectations. I'll post a graph later today after the Cleveland Fed releases the median and trimmed-mean CPI.