RSS Feed by Calculated Risk on 9/17/2023 06:31:00 PM
Sunday, September 17, 2023
Sunday Night Futures
Weekend:
• Schedule for Week of September 17, 2023
Monday:
• At 10:00 AM ET, The September NAHB homebuilder survey. The consensus is for a reading of 50, unchanged from 50 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.
From CNBC: Pre-Market Data and Bloomberg futures S&P 500 futures and DOW futures are up slightly (fair value).
Oil prices were down over the last week with WTI futures at $90.77 per barrel and Brent at $93.93 per barrel. A year ago, WTI was at $86, and Brent was at $89 - so WTI oil prices are up 5% year-over-year.
Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.82 per gallon. A year ago, prices were at $3.65 per gallon, so gasoline prices are up $0.17 year-over-year.
FOMC Preview: No Change to Policy Expected
by Calculated Risk on 9/17/2023 08:11:00 AM
Most analysts expect there will be no change to FOMC policy at this meeting, keeping the target range for the federal funds rate at 5‑1/4 to 5-1/2 percent.
On the meeting this week from BofA:
"We expect the Fed to stay on hold at the September FOMC meeting, consistent with recent Fed communications and current market pricing. Recent data should leave the Fed encouraged by ongoing disinflation but concerned about re-acceleration in inflation because of the strength in activity. ... The biggest focus of the September meeting should be the updated Summary of Economic Projections (SEP). We expect the 2023 median policy rate forecast to show one more 25bp hike, for a terminal rate of 5.5-5.75%. Perhaps the most important forecast is the 2024 median, which we think will shift up by 25bp to 4.875%, reflecting just 75bp of cuts next year."And from Goldman Sachs economists:
emphasis added
"[T]he story of the year so far is that solid growth has not derailed either the rebalancing of the labor market or progress in lowering inflation, as one might have feared. In fact, measures of labor market tightness have now returned to roughly their pre-pandemic levels, on average. This means that the desired rebalancing of supply and demand is now largely complete and that further sustained below-potential growth is likely no longer necessary.
At their September meeting, Fed officials are likely to make fairly straightforward revisions to their economic projections that reflect these recent developments. For 2023, we expect a substantial upward revision to GDP growth (+1.1pp to +2.1%) and moderate downward revisions to the unemployment rate (-0.2pp to 3.9%) and core inflation (-0.4pp to 3.5%)."
Economic projections will be released at this meeting. For review, here are the June projections. Since the last projections were released, the economy has performed better than the FOMC expected, and inflation was slightly below expectations.
It is likely that projections of the neutral Fed Funds rate will be increased again. This has implications for mortgage rates! See: Lawler: Is The “Natural” Rate of Interest Back to Pre-Financial Crisis Levels? and The "New Normal" Mortgage Rate Range
The BEA reported real GDP increased at a 2.1% annual rate in Q2, after increasing at a 2.0% annual rate in Q1. And real GDP is increasing around 3.0% annualized in Q3. Even with slower growth in Q4 - partially due to the likely government shutdown and the UAW strike, the FOMC projections for year-over-year growth in Q4 2023 will be revised up sharply, likely to over 2%.
| 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 | |
| March 2023 | 0.0 to 0.8 | 1.0 to 1.5 | 1.7 to 2.1 | |
The unemployment rate was at 3.8% in August. To reach the mid-point of the FOMC projections for Q4 2023, the economy would likely have to lose a significant number of jobs in Q4. 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 | |
| March 2023 | 4.0 to 4.7 | 4.3 to 4.9 | 4.3 to 4.8 | |
As of July 2023, PCE inflation increased 3.3 percent year-over-year (YoY), up from 3.0 percent YoY in June, and down from the recent peak of 7.0 percent in June 2022. Projections for PCE inflation will likely be revised down.
| 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 | |
| March 2023 | 3.0 to 3.8 | 2.2 to 2.8 | 2.0 to 2.2 | |
PCE core inflation increased 4.2 percent YoY, up from 4.1 percent in April, and down from the recent peak of 5.4 percent in February 2022. This includes PCE measure of shelter that was up 7.8% YoY in July (even though asking rents are soft). Core PCE inflation likely declined to around 3.8% in August, and the FOMC will revise down their 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 | |
| March 2023 | 3.5 to 3.9 | 2.3 to 2.8 | 2.0 to 2.2 | |
Saturday, September 16, 2023
Real Estate Newsletter Articles this Week: Current State of the Housing Market
by Calculated Risk on 9/16/2023 02:11:00 PM
At the Calculated Risk Real Estate Newsletter this week:
• Q2 Update: Delinquencies, Foreclosures and REO
• Part 1: Current State of the Housing Market; Overview for mid-September
• Part 2: Current State of the Housing Market; Overview for mid-September
• 3rd Look at Local Housing Markets in August
• 2nd Look at Local Housing Markets in August
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/
Schedule for Week of September 17, 2023
by Calculated Risk on 9/16/2023 08:11:00 AM
The key reports this week are August Housing Starts and Existing Home sales.
The FOMC meets this week and no change to policy is expected.
10:00 AM: The September NAHB homebuilder survey. The consensus is for a reading of 50, unchanged from 50 in August. Any number above 50 indicates that more builders view sales conditions as good than poor.
8:30 AM: Housing Starts for August. This graph shows single and total housing starts since 1968.
The consensus is for 1.440 million SAAR, down from 1.452 million SAAR.
10:00 AM: State Employment and Unemployment (Monthly) for August 2023
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 August (a leading indicator for commercial real estate).
2:00 PM: FOMC Meeting Announcement. No change to policy is expected at this meeting.
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: The initial weekly unemployment claims report will be released. The consensus is for 224 thousand initial claims, up from 220 thousand last week.
8:30 AM: the Philly Fed manufacturing survey for September. The consensus is for a reading of 0.0, up from -12.0.
10:00 AM: Existing Home Sales for August from the National Association of Realtors (NAR). The consensus is for 4.10 million SAAR, up from 4.07 million in July.The graph shows existing home sales from 1994 through the report last month.
Housing economist Tom Lawler expects the NAR to report 4.07 million SAAR.
No major economic releases scheduled.
Friday, September 15, 2023
Sept 15th COVID Update: Deaths and Hospitalizations Increased
by Calculated Risk on 9/15/2023 07:58:00 PM
Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.
Due to changes at the CDC, weekly cases are no longer updated.
After the first few weeks, the pandemic low for weekly deaths had been the week of July 7, 2021, at 1,690 deaths (until recently).
Recently hospitalizations have almost tripled from a low of 5,150 in June 2023.
| COVID Metrics | ||||
|---|---|---|---|---|
| Now | Week Ago | Goal | ||
| Hospitalized2🚩 | 14,489 | 12,984 | ≤3,0001 | |
| Deaths per Week2🚩 | 860 | 844 | ≤3501 | |
| 1my goals to stop weekly posts, 2Weekly for Currently Hospitalized, and Deaths 🚩 Increasing number weekly for Hospitalized and Deaths ✅ Goal met. | ||||
Click on graph for larger image.This graph shows the weekly (columns) number of deaths reported.
Weekly deaths have almost doubled from a low of 469 in early July.
For deaths, I'm currently using 3 weeks ago for "now", since the most recent two weeks will be revised significantly.
3rd Look at Local Housing Markets in August
by Calculated Risk on 9/15/2023 03:04:00 PM
Today, in the Calculated Risk Real Estate Newsletter: 3rd Look at Local Housing Markets in August
A brief excerpt:
Note: The National Association of Realtors (NAR) is scheduled to release August existing home sales next week on Thursday, September 21st, at 10:00 AM ET. The consensus is the NAR will report sales of 4.10 million SAAR, up from 4.07 million in July.There is much more in the article. You can subscribe at https://calculatedrisk.substack.com/
This is the third look at local markets in August. I’m tracking a sample of about 40 local housing markets in the US. Some of the 40 markets are states, and some are metropolitan areas. I’ll update these tables throughout the month as additional data is released.
Closed sales in August were mostly for contracts signed in June and July. Since 30-year fixed mortgage rates were in the 6.7% range in June, and 6.8% in July, compared to the mid-5% range the previous year, closed sales were down year-over-year in August.
...
Here is a summary of active listings for these housing markets in August.
Inventory for these markets is down 4.7% YoY, a slightly smaller YoY decline than in July.
...
More local markets to come!
Q3 GDP Tracking: Around 3%
by Calculated Risk on 9/15/2023 11:15:00 AM
From BofA:
Overall, the data flow since our last report pushed our 3Q US GDP tracking down two-tenths to 2.9% q/q saar and 2Q is down two-tenths as well to 2.3%. [Sept 15th estimate]From Goldman:
emphasis added
We boosted our Q3 GDP tracking estimate by one tenth to +3.2% (qoq ar) and our domestic final sales growth forecast by the same amount to +2.9%. [Sept 14th estimate]And from the Altanta Fed: GDPNow
The GDPNow model estimate for real GDP growth (seasonally adjusted annual rate) in the third quarter of 2023 is 4.9 percent on September 14, down from 5.6 percent on September 8. After recent releases from the US Census Bureau, the US Bureau of Labor Statistics, and the US Department of the Treasury's Bureau of the Fiscal Service, the nowcasts of third-quarter real personal consumption expenditures growth, third-quarter real gross private domestic investment growth, and third-quarter real government spending growth decreased from 4.0 percent, 11.7 percent, and 2.3 percent, respectively, to 3.5 percent, 10.6 percent, and 1.9 percent. [Sept 14th estimate]
Industrial Production Increased 0.4% in August
by Calculated Risk on 9/15/2023 09:15:00 AM
From the Fed: Industrial Production and Capacity Utilization
Industrial production increased 0.4 percent in August, and manufacturing output inched up 0.1 percent. The August reading for manufacturing was held back by a drop of 5 percent in the output of motor vehicles and parts; factory output elsewhere rose 0.6 percent. The index for mining moved up 1.4 percent, and the index for utilities climbed 0.9 percent. At 103.5 percent of its 2017 average, total industrial production in August was 0.2 percent above its year-earlier level. Capacity utilization moved up to 79.7 percent in August, in line with its long-run (1972–2022) average.
emphasis added
Click on graph for larger image.This graph shows Capacity Utilization. This series is up from the record low set in April 2020, and above the level in February 2020 (pre-pandemic).
Capacity utilization at 79.7% is at the average from 1972 to 2022. This was above consensus expectations.
Note: y-axis doesn't start at zero to better show the change.
The second graph shows industrial production since 1967.Industrial production increased in August to 103.5. This is above the pre-pandemic level.
Industrial production was above consensus expectations, and the previous months were revised up.
Thursday, September 14, 2023
Friday: Industrial Production, NY Fed Mfg
by Calculated Risk on 9/14/2023 07:36:00 PM
Note: Mortgage rates are from MortgageNewsDaily.com and are for top tier scenarios.
Friday:
• At 8:30 AM ET, The New York Fed Empire State manufacturing survey for September. The consensus is for a reading of -10.7, up from -19.0.
• At 9:15 AM, The Fed will release Industrial Production and Capacity Utilization for August. The consensus is for a 0.1% increase in Industrial Production, and for Capacity Utilization to be unchanged at 79.3%.
• At 10:00 AM, University of Michigan's Consumer sentiment index (Preliminary for September).
Realtor.com Reports Weekly Active Inventory Down 5.1% YoY; New Listings Down 7.1% YoY
by Calculated Risk on 9/14/2023 02:55:00 PM
Realtor.com has monthly and weekly data on the existing home market. Here is their weekly report from Hannah Jones: Weekly Housing Trends View — Data Week Ending Sep 9, 2023
• Active inventory declined, with for-sale homes lagging behind year ago levels by 5.1%. This past week marked the 12th consecutive decline in the number of homes actively for sale compared to the prior year, however the gap narrowed compared to the previous week’s -5.2% figure.
• New listings–a measure of sellers putting homes up for sale–were down again this week, by 7.1% from one year ago. For the past 62 weeks, there have been fewer newly listed homes compared to the same time one year ago. The annual gap has generally narrowed since late June as the data lapped last year’s lower listing trend. While the number of newly listed homes increased from July to August (which is not typical in this season), new home listings have declined as is typical in the first two weeks in September.
Here is a graph of the year-over-year change in inventory according to realtor.com. Inventory was down 5.1% year-over-year - this was the twelfth consecutive week with a YoY decrease following 58 consecutive weeks with a YoY increase in inventory.
Inventory is still up from the record lows in the 2nd half of 2021 and early 2022, and it is unlikely we will see new record lows by this measure this year.
