by Calculated Risk on 8/29/2023 01:34:00 PM

Two key points:
1) There is a clear seasonal pattern for house prices.
2) The surge in distressed sales during the housing bust distorted the seasonal pattern.  This was because distressed sales (at lower price points) happened at a steady rate all year, while regular sales followed the normal seasonal pattern.  This made for larger swings in the seasonal factor during the housing bust.

Click on graph for larger image.

This graph shows the month-to-month change in the NSA Case-Shiller National index since 1987 (through June 2023). The seasonal pattern was smaller back in the '90s and early '00s and increased once the bubble burst.

The seasonal swings declined following the bust, however the more recent price surge changed the month-over-month pattern.

The second graph shows the seasonal factors for the Case-Shiller National index since 1987. The factors started to change near the peak of the bubble, and really increased during the bust since normal sales followed the regular seasonal pattern - and distressed sales happened all year.   

The swings in the seasonal factors were decreasing following the bust but have increased again recently - this time without a surge in distressed sales.

This raises an interesting question: Why are prices weaker in the off-season than usual?

by Calculated Risk on 8/29/2023 10:11:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Unchanged year-over-year in June

Excerpt:

The recent increase in mortgage rates to over 7% will not impact the Case-Shiller index until reports are released in the Fall.
...
Here is a comparison of year-over-year change in median house prices from the NAR and the year-over-year change in the Case-Shiller index. Median prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices. However, in general, the Case-Shiller index follows the median price.

The median price was up 1.9% year-over-year in July, and, as expected, the Case-Shiller National Index was unchanged year-over-year in the June report - and will likely be up year-over-year in the July report to new all-time highs.

Note: I’ll have more on real prices, price-to-rent and affordability later this week.

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

by Calculated Risk on 8/29/2023 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings edged down to 8.8 million on the last business day of July, the U.S. Bureau of Labor Statistics reported today. Over the month, the number of hires and total separations changed little at 5.8 million and 5.5 million, respectively. Within separations, quits (3.5 million) decreased, while layoffs and discharges (1.6 million) changed little.
emphasis added

The following graph shows job openings (black line), hires (dark blue), Layoff, Discharges and other (red column), and Quits (light blue column) from the JOLTS.

This series started in December 2000.

Note: The difference between JOLTS hires and separations is similar to the CES (payroll survey) net jobs headline numbers. This report is for July; the employment report this Friday will be for August.

Click on graph for larger image.

Note that hires (dark blue) and total separations (red and light blue columns stacked) are usually pretty close each month. This is a measure of labor market turnover.  When the blue line is above the two stacked columns, the economy is adding net jobs - when it is below the columns, the economy is losing jobs.

The spike in layoffs and discharges in March 2020 is labeled, but off the chart to better show the usual data.

Jobs openings decreased in July to 8.83 million from 9.17 million in June.

The number of job openings (black) were down 22% year-over-year. 

Quits were down 12% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

by Calculated Risk on 8/29/2023 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for June ("June" is a 3-month average of April, May and June closing prices).

This release includes prices for 20 individual cities, two composite indices (for 10 cities and 20 cities) and the monthly National index.

From S&P S&P CoreLogic Case-Shiller Index Positive Momentum Continues in June

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported 0.0% annual change in June, up from a loss of -0.4% in the previous month. The 10- City Composite showed a decrease of -0.5%, which is an improvement on the -1.1% decrease in the previous month. The 20-City Composite posted a year-over-year loss of -1.2%, up from -1.7% in the previous month.
...
Before seasonal adjustment, the U.S. National Index posted a 0.9% month-over-month increase in June, while the 10-City and 20-City Composites also posted like increases of 0.9%.

After seasonal adjustment, the U.S. National Index posted a month-over-month increase of 0.7%, while the 10-City and 20-City Composites both posted increases of 0.9%.

“U.S. home prices continued to increase in June 2023,” says Craig J. Lazzara, Managing Director at S&P DJI. “Our National Composite rose by 0.9% in June, and it now stands only -0.02% below its alltime peak from exactly one year ago. Our 10- and 20-City Composites likewise each gained 0.9% in June 2023, and stand -0.5% and -1.2%, respectively, below their June 2022 peaks.

“As we’ve noted previously, the recovery in home prices is broadly based. Prices rose in all 20 cities in June, both before and after seasonal adjustment. Over the last 12 months, 10 cities show positive returns. Otherwise said, half the cities in our sample now sit at all-time high prices.

“Regional differences continue to be striking. On a year-over-year basis, June’s three best-performing cities were Chicago (+4.2%), Cleveland (+4.1%), and New York (+3.4%) – the same three that had topped our May leader board. At the other end of the scale, the worst performers continue to be in the Pacific and Mountain time zones, with San Francisco (-9.7%) and Seattle (-8.8%) at the bottom. The Midwest (+2.8%) continues as the nation’s strongest region, followed this month by the Northeast (+1.6%). The West (-5.9%) remains the weakest region.
emphasis added

Click on graph for larger image.

The first graph shows the nominal seasonally adjusted Composite 10, Composite 20 and National indices (the Composite 20 was started in January 2000).

The Composite 10 index is up 0.9% in June (SA) and down 0.5% from the recent peak in June 2022.

The Composite 20 index is up 0.9% (SA) in June and down 1.2% from the recent peak in June 2022.

The National index is up 0.7% (SA) in June and is down slightly from the peak in June 2022.

The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is down 0.5% year-over-year.  The Composite 20 SA is down 1.2% year-over-year.

The National index SA is unchanged year-over-year.

Annual price changes were slightly above expectations.  I'll have more later.

by Calculated Risk on 8/28/2023 08:01:00 PM

From Matthew Graham at Mortgage News Daily: Rates Relieving Some Pressure After Last Week's Highs

Mortgage rates hit fresh multi-decade highs last week with many lenders hitting the mid-7% range earlier in the week for top tier conventional 30yr fixed scenarios. There was some immediate relief on Wednesday, but things have been broadly sideways since then. ...

There are several economic reports that have a strong track record of causing volatility for rates--at least one on each of the remaining days this week. [30 year fixed 7.29%]
emphasis added

Tuesday:
• At 9:00 AM ET, S&P/Case-Shiller House Price Index for June. The consensus is for a 1.1% year-over-year decrease in the Comp 20 index for June.

• Also at 9:00 AM, FHFA House Price Index for June. This was originally a GSE only repeat sales, however there is also an expanded index.

• At 10:00 AM, Job Openings and Labor Turnover Survey for July from the BLS.

by Calculated Risk on 8/28/2023 02:37:00 PM

Here is a graph of the Fannie Mae mortgage serious delinquency rate and the unemployment rate since 1998 (ht @CharlieAllievo).  

For the last two recessions, the delinquency rate and the unemployment rate moved in the same direction.

However, there were significant differences between the two periods.  During the housing bust, many homeowners had little or no equity - or even negative equity - when prices started falling.   If they lost their jobs, they were unable to pay their mortgage.

In the 2020 recession, most homeowners had significant equity - and the serious delinquency rate increased due to forbearance programs (most homeowners have exited forbearance now).  Note: Fannie includes homeowners in forbearance in the delinquency numbers.

Following the 2001 recession, the serious delinquency rate didn't increase significantly even though the unemployment rate increased.

I don't think there is a clear relationship between the delinquency rate and the unemployment rate.  It also depends on lending and homeowner's equity position.

by Calculated Risk on 8/28/2023 10:42:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Fannie Mae Single-Family Mortgage Serious Delinquency Rate Lowest since 2002

Brief excerpt:

Fannie Mae reported that the Single-Family Serious Delinquency decreased to 0.54% in July from 0.55% in June. The serious delinquency rate is down year-over-year from 0.76% in July 2022.  This is below the pre-pandemic low of 0.65% and the lowest rate since 2002.

The Fannie Mae serious delinquency rate peaked in February 2010 at 5.59% following the housing bubble and peaked at 3.32% in August 2020 during the pandemic.

These are mortgage loans that are "three monthly payments or more past due or in foreclosure". Mortgages in forbearance are being counted as delinquent in this monthly report but are not reported to the credit bureaus.
...
Since lending standards have been solid and most homeowners have substantial equity there will not be a huge wave of single-family foreclosures this cycle. This means that we will not see cascading price declines like following the housing bubble.

You can subscribe at https://calculatedrisk.substack.com/.

by Calculated Risk on 8/28/2023 08:21:00 AM

Altos reports that active single-family inventory was up 1.3% week-over-week.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of August 25th, inventory was at 503 thousand (7-day average), compared to 497 thousand the prior week.   

Year-to-date, inventory is up 2.5%.  And inventory is up 24.1% from the seasonal bottom 19 weeks ago.

The second graph shows the seasonal pattern for active single-family inventory since 2015.

The red line is for 2023.  The black line is for 2019.  Note that inventory is up from the record low for the same week in 2021, but below last year and still well below normal levels.

Inventory was down 9.3% compared to the same week in 2022 (last week it was down 10.0%), and down 47.1% compared to the same week in 2019 (last week down 48.0%). 

It appears same week inventory will be below 2022 levels for the remainder of the year. It is possible that inventory will fall below the record lows in 2021 and early 2022 later this year or in early 2024, but currently that seems unlikely.   Inventory might even be close to 2020 levels by the end of the year.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 8/27/2023 07:40:00 PM

Weekend:
• Schedule for Week of August 27, 2023

Monday:
• At 10:30 AM ET, Dallas Fed Survey of Manufacturing Activity for August. This is the last of the regional Fed manufacturing surveys for August.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 futures are up 6 and DOW futures are up 48 (fair value).

Oil prices were down over the last week with WTI futures at $79.83 per barrel and Brent at $84.48 per barrel. A year ago, WTI was at $94, and Brent was at $101 - so WTI oil prices are down about 15% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.78 per gallon. A year ago, prices were at $3.78 per gallon, so gasoline prices are unchanged year-over-year.

by Calculated Risk on 8/27/2023 09:52:00 AM

The next FOMC meeting will be held on September 19th and 20th. Projections will be released at this meeting.  For review, here are the June projections.

Since the last projections were released in June, the economy has performed better than the FOMC expected, and inflation was slightly below expectations.

The BEA reported that real GDP increased at a 2.4% annual rate in Q2, after increasing at a 2.0% rate in Q1.  Tracking estimates suggest real GDP will likely increase around 2.7% annualized in Q3. It appears the FOMC projections for year-over-year growth in Q4 2023 will be revised up sharply.

GDP projections of Federal Reserve Governors and Reserve Bank presidents, Change in Real GDP1
Projection Date	2023	2024	2025
June 2023	0.7 to 1.2	0.9 to 1.5	1.6 to 2.0

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 3.5% in July and the consensus estimate is that the unemployment rate was unchanged in August (to be released Friday, September 1st).  To reach the mid-point of the FOMC projections for Q4 2023, the economy would have to lose a significant number of jobs over the last several months of 2023.   The FOMC's unemployment rate projection for Q4 will likely be revised down.

Unemployment projections of Federal Reserve Governors and Reserve Bank presidents, Unemployment Rate2
Projection Date	2023	2024	2025
June 2023	4.0 to 4.3	4.3 to 4.6	4.3 to 4.6

² Projections for the unemployment rate are for the average civilian unemployment rate in the fourth quarter of the year indicated.

As of June 2023, PCE inflation increased 3.0 percent year-over-year (YoY), down from 3.8 percent YoY in May, and down from the recent peak of 7.0 percent in June 2022.  However, a year ago, July 2022 PCE inflation was slightly negative for the month, so YoY PCE inflation will likely increase in July (to be released this coming Thursday, Aug 31st).

PCE inflation was strong last year in the August to October period - increasing at a 4.2% annual rate - and YoY PCE inflation will likely be revised down at the September meeting.  

Inflation projections of Federal Reserve Governors and Reserve Bank presidents, PCE Inflation1
Projection Date	2023	2024	2025
June 2023	3.0 to 3.5	2.3 to 2.8	2.0 to 2.4

PCE core inflation increased 4.1 percent YoY in June, down from 4.6 percent in May, and down from the recent peak of 5.4 percent in February 2022.  However, a year ago, July 2022 core PCE inflation was low, so YoY PCE inflation will likely increase in July.

Core PCE inflation increased sharply in September and October last year - at a 6.3% annual rate - and YoY measures of core PCE will likely decline in September and October.  Core inflation remains a concern for the FOMC, however this includes shelter that was up 8.0% YoY in June (even though asking rents are slightly negative YoY).   Core PCE inflation for Q4 will likely be revised down slightly in the next FOMC projections.

Core Inflation projections of Federal Reserve Governors and Reserve Bank presidents, Core Inflation1
Projection Date	2023	2024	2025
June 2023	3.7 to 4.2	2.5 to 3.1	2.0 to 2.4