RSS Feed by Calculated Risk on 12/12/2022 08:08:00 PM
Monday, December 12, 2022
Tuesday: CPI
From Matthew Graham at Mortgage News Daily: Have We Mentioned CPI and The Fed?
It's been more than a month since the last CPI report sent mortgage rates lower at the fastest single-day pace on record. Since then, apart from one interesting reaction to Powell's speech two weeks ago, the main order of business has been to wait for the next CPI report and the Fed announcement that would follow a day later. As the new week begins, we're a mere 24 hours away. That makes today a placeholder of the highest order. Volatility is possible, especially after the 1pm 10yr Treasury auction, but it pales in comparison to what tomorrow may bring. [30 year fixed 6.39%]Tuesday:
emphasis added
• At 6:00 AM ET, NFIB Small Business Optimism Index for November.
• At 8:30 AM, The Consumer Price Index for November from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.3% increase in core CPI. The consensus is for CPI to be up 7.3% year-over-year and core CPI to be up 6.1% YoY.
Second Home Market: South Lake Tahoe in November
by Calculated Risk on 12/12/2022 02:18:00 PM
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 November 2022, and shows inventory (blue), and the year-over-year (YoY) change in the median price (12-month average).
Note: The median price is a 12-month average, and 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 still up almost 3-fold from the record low set in February 2022, and up 12% year-over-year. Prices are up 2.9% YoY (and the YoY change has been mostly trending down).
It is possible that the YoY change will turn negative soon - even with inventory at historically fairly low levels.
2nd Look at Local Housing Markets in November; Another step down in sales in November
by Calculated Risk on 12/12/2022 11:41:00 AM
Today, in the Calculated Risk Real Estate Newsletter: 2nd Look at Local Housing Markets in November
A brief excerpt:
This is the second look at local markets in November. I’m tracking about 35 local housing markets in the US. Some of the 35 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/
Closed sales in November were mostly for contracts signed in September and October. Mortgage rates moved higher in September, and 30-year mortgage rates were over 7% for most of October (no points), and that likely impacted closed sales in November and December.
...
Here is a summary of active listings for these housing markets in November.
Inventory in these markets were down 35% YoY in January and are now up 87% YoY! So, this is a significant change from earlier this year, and a larger YoY inventory increase than in October (up 75% YoY).
...
Many more local markets to come!
Housing December 12th Weekly Update: Inventory Decreased 2.5% Week-over-week
by Calculated Risk on 12/12/2022 09:19:00 AM
Active inventory decreased last week. Here are the same week inventory changes for the last four years (usually inventory declines seasonally through the Winter):
2022: -13.9K
2021: -11.7K
2020: -12.4K
2019: -12.4K
Altos reports inventory is down 2.6% week-over-week and down 7.2% from the peak on October 28th.
Click on graph for larger image.
This inventory graph is courtesy of Altos Research.
Click on graph for larger image.This inventory graph is courtesy of Altos Research.
As of December 9th, inventory was at 535 thousand (7-day average), compared to 549 thousand the prior week.
Compared to the same week in 2021, inventory is up 58.0% from 339 thousand, and compared to the same week in 2020 inventory is up 14.3% from 468 thousand. However, compared to 3 years ago (2019), inventory is down 34.8% from 822 thousand.
Here are the inventory milestones I’ve been watching for with the Altos data:
1. The seasonal bottom (happened on March 4, 2022, for Altos) ✅
2. Inventory up year-over-year (happened on May 20, 2022, for Altos) ✅
3. Inventory up compared to 2020 (happened on October 7, 2022, for Altos) ✅
4. Inventory up compared to 2019 (currently down 34.1%).
Mike Simonsen discusses this data regularly on Youtube.
1. The seasonal bottom (happened on March 4, 2022, for Altos) ✅
2. Inventory up year-over-year (happened on May 20, 2022, for Altos) ✅
3. Inventory up compared to 2020 (happened on October 7, 2022, for Altos) ✅
4. Inventory up compared to 2019 (currently down 34.1%).
Here is a graph of the inventory change vs 2021 (milestone 2 above), 2020 (milestone 3) and 2019 (milestone 4). The blue line is the year-over-year data, the red line is compared to two years ago, and dashed purple is compared to 2019.
A key will be if inventory declines slower than usual during the winter months.
Mike Simonsen discusses this data regularly on Youtube.
Four High Frequency Indicators for the Economy
by Calculated Risk on 12/12/2022 08:56:00 AM
These indicators are mostly for travel and entertainment. It was interesting to watch these sectors recover as the pandemic impact subsided.
The TSA is providing daily travel numbers.
This data is as of December 11th.
Click on graph for larger image.This data shows the 7-day average of daily total traveler throughput from the TSA for 2019 (Light Blue), 2020 (Black), 2021 (Blue) and 2022 (Red).
The dashed line is the percent of 2019 for the seven-day average.
The 7-day average is 5.3% below the same week in 2019 (94.7% of 2019). (Dashed line)
Air travel - as a percent of 2019 - has picked up recently - but still below pre-pandemic levels.
----- Movie Tickets: Box Office Mojo -----
This data shows domestic box office for each week and the median for the years 2016 through 2019 (dashed light blue).
This data shows domestic box office for each week and the median for the years 2016 through 2019 (dashed light blue). Black is 2020, Blue is 2021 and Red is 2022.
The data is from BoxOfficeMojo through December 8th.
Note that the data is usually noisy week-to-week and depends on when blockbusters are released.
Movie ticket sales were at $72 million last week, down about 63% from the median for the week.
Note that the data is usually noisy week-to-week and depends on when blockbusters are released.
Movie ticket sales were at $72 million last week, down about 63% from the median for the week.
This graph shows the seasonal pattern for the hotel occupancy rate using the four-week average. 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).
This data is through Dec 3rd. The occupancy rate was down 7.7% compared to the same week in 2019.
The 4-week average of the occupancy rate is above the median rate for the previous 20 years (Blue) and close to 2019 levels.
Notes: Y-axis doesn't start at zero to better show the seasonal change.
Notes: Y-axis doesn't start at zero to better show the seasonal change.
This graph, based on weekly data from the U.S. Energy Information Administration (EIA), shows gasoline supplied compared to the same week of 2019.
Blue is for 2020. Purple is for 2021, and Red is for 2022.
As of December 2nd, gasoline supplied was down 7.5% compared to the same week in 2019.
Recently gasoline supplied has been running below 2019 and 2021 levels - and sometimes below 2020.
Sunday, December 11, 2022
Sunday Night Futures
by Calculated Risk on 12/11/2022 06:13:00 PM
Weekend:
• Schedule for Week of December 11, 2022
• FOMC Preview: 50bp Hike, Increase "Terminal Rate"
Monday:
• No major economic releases scheduled.
From CNBC: Pre-Market Data and Bloomberg futures S&P 500 and DOW futures are mostly unchanged (fair value).
Oil prices were down over the last week with WTI futures at $71.02 per barrel and Brent at $76.10 per barrel. A year ago, WTI was at $71, and Brent was at $74 - so WTI oil prices are unchanged year-over-year.
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.21 per gallon. A year ago, prices were at $3.33 per gallon, so gasoline prices are down $0.12 per gallon year-over-year.
FOMC Preview: 50bp Hike, Increase "Terminal Rate"
by Calculated Risk on 12/11/2022 10:21:00 AM
Expectations are the FOMC will announce a 50bp rate increase in the federal funds rate at the meeting this week and increase the "terminal rate" to 5-5.25%.
From Merrill Lynch:
1 Projections of change in real GDP and inflation are from the fourth quarter of the previous year to the fourth quarter of the year indicated.
The unemployment rate was at 3.7% in November. So far, the economic slowdown has barely pushed up the unemployment rate, and the FOMC will likely revised down the 2022 projection but might revise 2023 up slightly.
2 Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.
As of October 2022, PCE inflation was up 6.0% from October 2021. This was below the cycle high of 7.0% YoY in June. There was a surge of inflation in Q4 2021, so with less inflation in Q4 this year, it is possible inflation will decline to the top of the projected year-over-year range in Q4.
PCE core inflation was up 5.0% in October year-over-year. This was below the cycle high of 5.4% YoY in February. Core inflation has picked up more than expected and will likely be above the September Q4 projected range.
"A relatively soft November inflation report is unlikely to affect the Fed’s decision. It has clearly telegraphed a 50bp hike in December, which would take the federal funds rate to 4.25-4.5%. The big question is where the Fed goes next. We expect another 50bp rate hike in February and then a 25bp hike in March for a terminal rate of 5.0-5.25%. We think the Fed will need to see material weakening in the labor market to stop hiking."From Goldman Sachs:
emphasis added
"Aside from a widely expected 50bp rate hike, the main event at the December FOMC meeting is likely to be an increase in the projected peak for the funds rate in 2023. We expect the median dot to rise 50bp to a new peak of 5-5.25% ... We continue to expect three 25bp hikes in 2023 to a peak of 5-5.25%, though the risks are tilted toward 50bp in February."
Analysts will be looking for comments on the size of future rate hikes. In September, the FOMC participants’ midpoint of the target level for the federal funds rate 4.625% (a range of 4.5-4.75%). Expectations are the FOMC will raise that target range to 5.0-5.25% at the meeting this week.
Note that CPI for November will be released on Tuesday morning (prior to the two-day FOMC meeting). Analysts will be looking at core-CPI ex-Shelter for signs that inflation is falling faster than expected, however the FOMC will likely focus on core-services ex-shelter inflation.
Projections will be released at this meeting. For review, here are the September projections.
Current Wall Street forecasts are for GDP to increase in 2022 Q4 over Q4, slightly above FOMC projections. For example, BofA is tracking: "After rounding, our 4Q US GDP tracking estimate moved up one-tenth to 1.6% q/q saar." And from Goldman: "We lowered our Q4 GDP tracking estimate by 0.1pp to +1.7% (qoq ar).
These tracking estimates would put Q4/Q4 at 0.63% in 2022. So, the FOMC will probably revise up 2022 GDP slightly, but might revise down 2023 GDP.
| GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1 | ||||
|---|---|---|---|---|
| Projection Date | 2022 | 2023 | 2024 | |
| Sept 2022 | 0.1 to 0.3 | 0.5 to 1.5 | 1.4 to 2.0 | |
The unemployment rate was at 3.7% in November. So far, the economic slowdown has barely pushed up the unemployment rate, and the FOMC will likely revised down the 2022 projection but might revise 2023 up slightly.
| Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2 | ||||
|---|---|---|---|---|
| Projection Date | 2022 | 2023 | 2024 | |
| Sept 2022 | 3.8 to 3.9 | 4.1 to 4.5 | 4.0 to 4.6 | |
As of October 2022, PCE inflation was up 6.0% from October 2021. This was below the cycle high of 7.0% YoY in June. There was a surge of inflation in Q4 2021, so with less inflation in Q4 this year, it is possible inflation will decline to the top of the projected year-over-year range in Q4.
| Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1 | ||||
|---|---|---|---|---|
| Projection Date | 2022 | 2023 | 2024 | |
| Sept 2022 | 5.3 to 5.7 | 2.6 to 3.5 | 2.1 to 2.6 | |
PCE core inflation was up 5.0% in October year-over-year. This was below the cycle high of 5.4% YoY in February. Core inflation has picked up more than expected and will likely be above the September Q4 projected range.
| Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1 | ||||
|---|---|---|---|---|
| Projection Date | 2022 | 2023 | 2024 | |
| Sept 2022 | 4.4 to 4.6 | 3.0 to 3.4 | 2.2 to 2.5 | |
Saturday, December 10, 2022
Real Estate Newsletter Articles this Week: Mortgage Equity Withdrawal Still Solid in Q3
by Calculated Risk on 12/10/2022 02:11:00 PM
At the Calculated Risk Real Estate Newsletter this week:
• Mortgage Equity Withdrawal Still Solid in Q3
• 2023 Housing Forecasts
• 1st Look at Local Housing Markets in November
• Q3 Update: Delinquencies, Foreclosures and REO
• Black Knight Mortgage Monitor: Home Prices Declined in October; Down 3.2% since June
This is usually published 4 to 6 times a week and provides more in-depth analysis of the housing market.
You can subscribe at https://calculatedrisk.substack.com/
Most content is available for free (and no Ads), but please subscribe!
Schedule for Week of December 11, 2022
by Calculated Risk on 12/10/2022 08:11:00 AM
The key economic reports this week are November CPI and Retail Sales.
For manufacturing, November Industrial Production, and the December New York and Philly Fed surveys, will be released this week.
The FOMC meets this week, and the FOMC is expected to announce a 50 bp hike in the Fed Funds rate.
No major economic releases scheduled.
6:00 AM: NFIB Small Business Optimism Index for November.
8:30 AM: The Consumer Price Index for November from the BLS. The consensus is for a 0.3% increase in CPI, and a 0.3% increase in core CPI. The consensus is for CPI to be up 7.3% year-over-year and core CPI to be up 6.1% YoY.
7:00 AM ET: The Mortgage Bankers Association (MBA) will release the results for the mortgage purchase applications index.
During the day: The AIA's Architecture Billings Index for November (a leading indicator for commercial real estate).
2:00 PM: FOMC Meeting Announcement. The FOMC is expected to announce a 50 bp hike in the Fed Funds rate.
2:00 PM: FOMC Forecasts This will include the Federal Open Market Committee (FOMC) participants' projections of the appropriate target federal funds rate along with the quarterly economic projections.
2:30 PM: Fed Chair Jerome Powell holds a press briefing following the FOMC announcement.
8:30 AM ET: Retail sales for November will be released. The consensus is for a 0.2% decrease in retail sales.This graph shows retail sales since 1992. This is monthly retail sales and food service, seasonally adjusted (total and ex-gasoline).
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 230 thousand initial claims, unchanged from 230 thousand last week.
8:30 AM: The New York Fed Empire State manufacturing survey for December. The consensus is for a reading of -1.0, down from 4.5.
8:30 AM: the Philly Fed manufacturing survey for December. The consensus is for a reading of -12.0, up from -19.4.
9:15 AM: The Fed will release Industrial Production and Capacity Utilization for November.This graph shows industrial production since 1967.
The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to decrease to 79.8%.
No major economic releases scheduled.
Friday, December 09, 2022
COVID Dec 9, 2022: Update on Cases, Hospitalizations and Deaths
by Calculated Risk on 12/09/2022 09:16:00 PM
On COVID (focus on hospitalizations and deaths). Data is now weekly.
| COVID Metrics | ||||
|---|---|---|---|---|
| Now | Week Ago | Goal | ||
| New Cases per Week2🚩 | 458,986 | 306,773 | ≤35,0001 | |
| Hospitalized2🚩 | 29,598 | 26,015 | ≤3,0001 | |
| Deaths per Week2🚩 | 2,981 | 1,844 | ≤3501 | |
| 1my goals to stop weekly posts, 2Weekly for Cases, Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Cases, Hospitalized, and Deaths ✅ Goal met. | ||||
Click on graph for larger image.This graph shows the weekly (columns) number of deaths reported.
NOTE: The data is probably catching up from the low levels during the holiday week, but this is the most cases since September, and the most deaths since early October.
