by Calculated Risk on 11/03/2022 08:46:00 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 $73.3 billion in September, up $7.6 billion from $65.7 billion in August, revised.

September exports were $258.0 billion, $2.8 billion less than August exports. September imports were $331.3 billion, $4.8 billion more than August imports.
emphasis added

Click on graph for larger image.

Exports decreased and imports increased in September.

Exports are up 22% year-over-year; imports are up 14% 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, exports of petroleum products are slightly positive.

The trade deficit with China increased to $37.3 billion in September, from $36.4 billion a year ago.

The trade deficit was slightly higher than the consensus forecast.

by Calculated Risk on 11/03/2022 08:33:00 AM

The DOL reported:

In the week ending October 29, the advance figure for seasonally adjusted initial claims was 217,000, a decrease of 1,000 from the previous week's revised level. The previous week's level was revised up by 1,000 from 217,000 to 218,000. The 4-week moving average was 218,750, a decrease of 500 from the previous week's revised average. The previous week's average was revised up by 250 from 219,000 to 219,250.
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 decreased to 218,750.

The previous week was revised up.

Weekly claims were lower than the consensus forecast.

by Calculated Risk on 11/02/2022 08:29:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

Thursday:
• At 8:30 AM ET, The initial weekly unemployment claims report will be released.  The consensus is for an increase to 222 thousand from 217 thousand last week.

• Also at 8:30 AM, Trade Balance report for September from the Census Bureau.  The consensus is for the deficit to be $72.1 billion in September, from $67.4 billion in August.

• At 10:00 AM, the ISM Services Index for October.  The consensus is for a decrease to 55.5 from 56.7.

by Calculated Risk on 11/02/2022 04:28:00 PM

A quick note ... this was the key sentence from Fed Chair Powell's press conference: "the ultimate level of interest rates will be higher than previously expected".

Powell also said that "At some point it will be appropriate to slow the rate of increases", but he said that might be in December or in 2023.

Overall his comments were hawkish.

by Calculated Risk on 11/02/2022 02:03:00 PM

Fed Chair Powell press conference video here or on YouTube here, starting at 2:30 PM ET.

FOMC Statement:

Recent indicators point to modest growth in spending and production. Job gains have been robust in recent months, and the unemployment rate has remained low. Inflation remains elevated, reflecting supply and demand imbalances related to the pandemic, higher food and energy prices, and broader price pressures.

Russia's war against Ukraine is causing tremendous human and economic hardship. The war and related events are creating additional upward pressure on inflation and are weighing on global economic activity. The Committee is highly attentive to inflation risks.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. In support of these goals, the Committee decided to raise the target range for the federal funds rate to 3-3/4 to 4 percent. The Committee anticipates that ongoing increases in the target range will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time. In determining the pace of future increases in the target range, the Committee will take into account the cumulative tightening of monetary policy, the lags with which monetary policy affects economic activity and inflation, and economic and financial developments. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in the Plans for Reducing the Size of the Federal Reserve's Balance Sheet that were issued in May. The Committee is strongly committed to returning inflation to its 2 percent objective.

In assessing the appropriate stance of monetary policy, the Committee will continue to monitor the implications of incoming information for the economic outlook. The Committee would be prepared to adjust the stance of monetary policy as appropriate if risks emerge that could impede the attainment of the Committee's goals. The Committee's assessments will take into account a wide range of information, including readings on public health, labor market conditions, inflation pressures and inflation expectations, and financial and international developments.

Voting for the monetary policy action were Jerome H. Powell, Chair; John C. Williams, Vice Chair; Michael S. Barr; Michelle W. Bowman; Lael Brainard; James Bullard; Susan M. Collins; Lisa D. Cook; Esther L. George; Philip N. Jefferson; Loretta J. Mester; and Christopher J. Waller.
emphasis added

by Calculated Risk on 11/02/2022 12:49:00 PM

Today, in the Calculated Risk Real Estate Newsletter: First Look at 2023 Housing Forecasts

A brief excerpt:

Towards the end of each year, I collect some housing forecasts for the following year.

For comparison, new home sales in 2022 will probably be around 650 thousand, down from 771 thousand in 2021.

Total housing starts will be around 1.58 million in 2022, down slightly from 1.60 million in 2021.

Existing home sales will be around 5.1 million in 2022, down from 6.1 million in 2021.

As of August, Case-Shiller house prices were up 13.0% year-over-year, but the year-over-year change is slowing rapidly.

Currently the Fannie Mae forecast is an outlier with a sharper decline in total starts and home sales than the other forecasts.

These forecasts will be updated over the next couple of months, and I’ll also add several more as they become available (and my own forecasts).

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

by Calculated Risk on 11/02/2022 11:16:00 AM

The Census Bureau released the Residential Vacancies and Homeownership report for Q3 2022.

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 2022 were 6.0 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate was not statistically different from the rate in the third quarter 2021 (5.8 percent) and 0.4 percentage points higher than the rate in the second quarter 2022 (5.6 percent).

The homeowner vacancy rate of 0.9 percent was virtually the same as the rate in the third quarter 2021 (0.9 percent) and not statistically different from the rate in the second quarter 2022 (0.8 percent).

The homeownership rate of 66.0 percent was 0.6 percentage points higher than the rate in the third quarter 2021 (65.4 percent) and not statistically different from the rate in the second quarter 2022 (65.8 percent).
emphasis added

Click on graph for larger image.

The HVS homeownership rate increased to 66.0% in Q3, from 65.8% in Q2.

The results in Q2 and Q3 2020 were distorted by the pandemic and should be ignored.



The HVS homeowner vacancy increased to 0.9% in Q3 from 0.8% in Q2.

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

The rental vacancy rate increased to 6.0% in Q3 from 5.6% in Q2.  

The HVS also has a series on asking rents. This surged following the early stages of the pandemic - like other measures - and is up 10.9% year-over-year in Q3 2022.

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

by Calculated Risk on 11/02/2022 08:26:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 239,000 Jobs in October; Annual Pay was Up 7.7%

Private sector employment increased by 239,000 jobs in October and annual pay was up 7.7 percent year-over-year, according to the October ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”).

The jobs report and pay insights use ADP’s fine-grained anonymized and aggregated payroll data of over 25 million U.S. employees to provide a representative picture of the labor market. The report details the current month’s total private employment change, and weekly job data from the previous month. ADP’s pay measure uniquely captures the earnings of a cohort of almost 10 million employees over a 12-month period.

“This is a really strong number given the maturity of the economic recovery but the hiring was not broad based,” said Nela Richardson, chief economist, ADP. “Goods producers, which are sensitive to interest rates, are pulling back, and job changers are commanding smaller pay gains. While we’re seeing early signs of Fed-driven demand destruction, it’s affecting only certain sectors of the labor market.”
emphasis added

This was above the consensus forecast of 200,000.  The BLS report will be released Friday, and the consensus is for 2o0 thousand non-farm payroll jobs added in October.

by Calculated Risk on 11/02/2022 07:00:00 AM

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

Mortgage applications decreased 0.5 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 28, 2022. This week’s results include revised data to reflect an update to last week’s survey results.

... The Refinance Index increased 0.2 percent from the previous week and was 85 percent lower than the same week one year ago. The seasonally adjusted Purchase Index decreased 1 percent from one week earlier. The unadjusted Purchase Index decreased 2 percent compared with the previous week and was 41 percent lower than the same week one year ago.

“Mortgage applications declined for the sixth consecutive week despite a slight drop in rates. The 30-year fixed rate decreased for the first time in over two months to 7.06 percent, but remained close to its highest since 2002,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Apart from the ARM loan rate, rates for all other loan types were more than three percentage points higher than they were a year ago. These elevated rates continue to put pressure on both purchase and refinance activity and have added to the ongoing affordability challenges impacting the broader housing market, as seen in the deteriorating trends in housing starts and home sales.”

Added Kan: “With most homeowners locked into significantly lower rates, refinance applications continued to run more than 80 percent below last year’s pace, while the refinance share of applications was 28.6 percent – the fifth straight week below 30 percent.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($647,200 or less) decreased to 7.06 percent from 7.16 percent, with points decreasing to 0.73 from 0.88 (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 this year.

The refinance index is near the lowest level since the year 2000.

The second graph shows the MBA mortgage purchase index

According to the MBA, purchase activity is down 41% year-over-year unadjusted.

The purchase index is 12% below the pandemic low and at the lowest level since 2015.

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

by Calculated Risk on 11/01/2022 09:00:00 PM

Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.

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 200,000 jobs added, down from 208,000 in September.

• At 2:00 PM, FOMC Meeting Announcement. The FOMC is expected to raise rates 75bp at this meeting.

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