by Calculated Risk on 12/26/2023 01:24:00 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 October 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.

by Calculated Risk on 12/26/2023 09:45:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Up 4.8% year-over-year in October

Excerpt:

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3-month average of August, September and October closing prices). October closing prices include some contracts signed in June, so there is a significant lag to this data. Here is a graph of the month-over-month (MoM) change in the Case-Shiller National Index Seasonally Adjusted (SA).

The MoM increase in the seasonally adjusted Case-Shiller National Index was at 0.65%. This was the ninth consecutive MoM increase following seven straight MoM decreases.

On a seasonally adjusted basis, prices increased in 19 of the 20 Case-Shiller cities on a month-to-month basis. Prices declined slightly in Portland in October. Seasonally adjusted, San Francisco has fallen 8.1% from the recent peak, Seattle is down 6.5% from the peak, Portland down 4.3%, Las Vegas is down 4.2%, and Phoenix is down 3.9%.

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

by Calculated Risk on 12/26/2023 09:00:00 AM

S&P/Case-Shiller released the monthly Home Price Indices for October ("October" is a 3-month average of August, September and October 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 Accelerates in October

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 4.8% annual change in October, up from a 4% change in the previous month. The 10-City Composite showed an increase of 5.7%, up from a 4.8% increase in the previous month. The 20-City Composite posted a year-over-year increase of 4.9%, up from a 3.9% increase in the previous month. Detroit reported the highest year-over-year gain among the 20 cities with an 8.1% increase in October, followed again by San Diego with a 7.2% increase. Portland fell 0.6% and remained the only city reporting lower prices in October versus a year ago.
...
Before seasonal adjustment, the U.S. National Index and 10-City Composite, posted 0.2% month-over-month increases in October, while the 20-City composite posted 0.1% increase.

After seasonal adjustment, the U.S. National Index, the 10-City and 20-City Composites each posted month-over-month increases of 0.6%.

"U.S. home prices accelerated at their fastest annual rate of the year in October”, says Brian D. Luke, Head of Commodities, Real & Digital assets at S&P DJI. Our National Composite rose by 0.2% in October, marking nine consecutive monthly gains and the strongest national growth rate since 2022.”

“Detroit kept pace as the fastest growing market for the second month in a row, registering an 8.1% annual gain. San Diego maintained the second spot with 7.2% annual gains, following by New York with a 7.1% gain. We are experiencing broad based home price appreciation across the country, with steady gains seen in nineteen of twenty cities. This month’s report reflects trendline growth compared to historical returns and little disparity among cities and regions.”

“Each of our 10-city, 20-city and National Index, remain at all-time highs, with 8 of 20 cities registering all-time highs (Miami, Atlanta, Chicago, Boston, Detroit, Charlotte, New York and Cleveland). While Portland remains slightly down compared to last year’s gains, Phoenix and Las Vegas have flipped to year over year gains. The Midwest and the Northeast region are fastest growing markets, while the Southwest and West regions have lagged other regions for over a year. A solid, if unspectacular report, this month’s index reflects a rising tide across nearly all markets.

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 0.6% in October (SA) and is at a new all-time high.

The Composite 20 index is up 0.6% (SA) in October and is also at a new all-time high.

The National index is up 0.6% (SA) in October and is also at a new all-time high.

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

The Composite 10 SA is up 5.7% year-over-year.  The Composite 20 SA is up 4.9% year-over-year.

The National index SA is up 4.8% year-over-year.

Annual price changes were close to expectations.  I'll have more later.

by Calculated Risk on 12/26/2023 08:00:00 AM

Today, in the Calculated Risk Real Estate Newsletter: FHFA’s National Mortgage Database: Outstanding Mortgage Rates, LTV and Credit Scores

A brief excerpt:

Here are some graphs on outstanding mortgages by interest rate, the average mortgage interest rate, borrowers’ credit scores and current loan-to-value (LTV) from the FHFA’s National Mortgage Database through Q3 2023 (released last Friday).
...
Here is some data showing the distribution of interest rates on closed-end, fixed-rate 1-4 family mortgages outstanding at the end of each quarter since Q1 2013 through Q3 2023.

This shows the surge in the percent of loans under 3%, and also under 4%, starting in early 2020 as mortgage rates declined sharply during the pandemic. The percent of outstanding loans under 4% peaked in Q1 2022 at 65.4% (now at 59.4%), and the percent under 5% peaked at 85.7% (now at 78.7%). These low existing mortgage rates makes it difficult for homeowners to sell their homes and buy a new home since their monthly payments would increase sharply. This is a key reason existing home inventory levels are so low.

The percent of loans over 6% bottomed in Q2 2022 at 7.1% and has increased to 11.5% in Q3 2023.

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

by Calculated Risk on 12/25/2023 07:34:00 PM

Weekend:
• Ten Economic Questions for 2024

• Schedule for Week of December 24, 2023

Tuesday:
• At 8:30 AM ET, Chicago Fed National Activity Index for November. This is a composite index of other data.

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

• Also at 9:00 AM, S&P/Case-Shiller House Price Index for October. The consensus is for an 5.0% year-over-year increase in the National index for October.

• At 10:30 AM, Dallas Fed Survey of Manufacturing Activity for December.

From CNBC: Pre-Market Data and Bloomberg futures S&P 500 are up 6 and DOW futures are up 67 (fair value).

Oil prices were up over the last week with WTI futures at $73.56 per barrel and Brent at $79.07 per barrel. A year ago, WTI was at $80, and Brent was at $82 - so WTI oil prices were down 8% year-over-year.

Here is a graph from Gasbuddy.com for nationwide gasoline prices. Nationally prices are at $3.09 per gallon. A year ago, prices were at $3.06 per gallon, so gasoline prices are up slightly year-over-year.

by Calculated Risk on 12/25/2023 10:48:00 AM

Altos reports that active single-family inventory was down 1.9% week-over-week and is now up 3.9% year-over-year.  Inventory will likely decrease seasonally until the Spring.

Click on graph for larger image.

This inventory graph is courtesy of Altos Research.

As of December 22nd, inventory was at 529 thousand (7-day average), compared to 539 thousand the prior week.   

Year-to-date, inventory is up 7.5% and will start at a higher level in 2024 than in 2023, but still far below pre-pandemic levels.

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 still well below normal levels.

Inventory was up 3.9% compared to the same week in 2022 (last week it was up 3.0%), and down 34.2% compared to the same week in 2019 (last week down 34.4%). 

Back in June, inventory was down almost 54% compared to 2019, so the gap to more normal inventory levels is closing.

Mike Simonsen discusses this data regularly on Youtube.

by Calculated Risk on 12/25/2023 09:21:00 AM

Happy Holidays and Merry Christmas to All!

Whose woods these are I think I know.
His house is in the village though;
He will not see me stopping here
To watch his woods fill up with snow.

My little horse must think it queer
To stop without a farmhouse near
Between the woods and frozen lake
The darkest evening of the year.

He gives his harness bells a shake
To ask if there is some mistake.
The only other sound’s the sweep
Of easy wind and downy flake.

The woods are lovely, dark and deep,
But I have promises to keep,
And miles to go before I sleep,
And miles to go before I sleep.

"Stopping by Woods on a Snowy Evening" by Robert Frost

Enjoy the season!

by Calculated Risk on 12/24/2023 09:19:00 AM

Here is a review of the Ten Economic Questions for 2023

Below are my ten questions for 2024 (I've been doing this online every year for almost 20 years!).  These are just questions; I'll follow up with some thoughts on each of these questions.

The purpose of these questions is to provide a framework of how the U.S. economy will likely perform in 2024, and if there are surprises - like in 2020 with the pandemic - to adjust my thinking.

1) Economic growth: Economic growth was probably close to 2.6% in 2023.  The FOMC is expecting growth of 1.2% to 1.7% Q4-over-Q4 in 2024. How much will the economy grow in 2024?  Will there be a recession in 2024?

2) Employment: Through November 2023, the economy added 2.6 million jobs in 2023.   This is down from 4.8 million jobs added in 2022, and 7.3 million in 2021 (the two best years ever), but still a solid year for employment gains. How much will job growth slow in 2024?  Or will the economy lose jobs? 

3) Unemployment Rate: The unemployment rate was at 3.7% in November, up from 3.6% in November 2022.   Currently the FOMC is forecasting the unemployment rate will increase to the 4.0% to 4.2% range in Q4 2024.  What will the unemployment rate be in December 2024?

4) Participation Rate: In November 2023, the overall participation rate was at 62.8%, up year-over-year from 62.2% in November 2022, but still below the pre-pandemic level of 63.3%.   Long term, the BLS is projecting the overall participation rate will decline to 60.4% by 2032 due to demographics.  What will the participation rate be in December 2024?

5) Inflation: Core PCE was up 3.2% YoY through November. This was down from a peak of 5.6% in early 2022.  The FOMC is forecasting the YoY change in core PCE will be in the 2.4% to 2.7% range in Q4 2024. Will the core inflation rate decrease further in 2024, and what will the YoY core inflation rate be in December 2024? 

6) Monetary Policy:  To slow inflation, the FOMC raised the federal funds rate four times in 2023 from "4-1/4 to 4-1/2 percent" at the beginning of 2023, to "5-1/4 to 5-1/2" at the end of the year. Most FOMC participants expect around three 25 bp rate cuts in 2024.  What will the Fed Funds rate be in December 2024?

7) Wage Growth: Wage growth was solid in 2023, up 4.0% year-over-year as of November, but down from 4.8% YoY in 2022.  How much will wages increase in 2024?

8) Residential Investment: Residential investment (RI) was slightly negative through the first three quarters of 2023 as the housing market appeared to bottom.  Through November, starts were down 9.9% year-to-date compared to the same period in 2021. New home sales were up 3.9% year-to-date through November.  Note: RI is mostly investment in new single-family structures, multifamily structures, home improvement and commissions on existing home sales.  How much will RI change in 2024?  How about housing starts and new home sales in 2024?

9) House Prices: It appears house prices - as measured by the national repeat sales index (Case-Shiller, FHFA, and Freddie Mac) - will be up mid-single digits in 2023.  What will happen with house prices in 2024?

10) Housing Inventory: Housing inventory decreased sharply during the pandemic to record lows in early 2022.  Since then, inventory has increased, but is still well below pre-pandemic levels.  Will inventory increase further in 2024?

• Question #1 for 2024: How much will the economy grow in 2024? Will there be a recession in 2024?
• Question #2 for 2024: How much will job growth slow in 2024? Or will the economy lose jobs?
• Question #3 for 2024: What will the unemployment rate be in December 2024?
• Question #4 for 2024: What will the participation rate be in December 2024?
• Question #5 for 2024: What will the YoY core inflation rate be in December 2024?
• Question #6 for 2024: What will the Fed Funds rate be in December 2024?
• Question #7 for 2024: How much will wages increase in 2024?
• Question #8 for 2024: How much will Residential investment change in 2024? How about housing starts and new home sales in 2024?
• Question #9 for 2024: What will happen with house prices in 2024?
• Question #10 for 2024: Will inventory increase further in 2024?

by Calculated Risk on 12/23/2023 02:11:00 PM

At the Calculated Risk Real Estate Newsletter this week:

• New Home Sales decrease to 590,000 Annual Rate in November

• NAR: Existing-Home Sales Increased to 3.82 million SAAR in November

• Single Family Starts Increase Sharply in November, Near Record Number of Multi-Family Housing Units Under Construction

• Final Look at Local Housing Markets in November

• Early Read on Existing Home Sales in November

• 4th Look at Local Housing Markets in November

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/

by Calculated Risk on 12/23/2023 08:11:00 AM

Happy Holidays and Merry Christmas!

The key indicator this week is Case-Shiller House Prices for October.

----- Monday, December 25th -----
All US markets will be closed in observance of the Christmas Holiday.

----- Tuesday, December 26th -----
8:30 AM: Chicago Fed National Activity Index for November. This is a composite index of other data.

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

9:00 AM ET: S&P/Case-Shiller House Price Index for October.

This graph shows graph shows the Year over year change in the seasonally adjusted National Index, Composite 10 and Composite 20 indexes through the most recent report (the Composite 20 was started in January 2000).

The consensus is for an 5.0% year-over-year increase in the National index for October.

10:30 AM: Dallas Fed Survey of Manufacturing Activity for December.

----- Wednesday, December 27th -----
10:00 AM: Richmond Fed Survey of Manufacturing Activity for December. This is the last of regional manufacturing surveys for December.

----- Thursday, December 28th -----
8:30 AM: The initial weekly unemployment claims report will be released. The consensus is for 210 thousand, up from 205 thousand last week.

10:00 AM: Pending Home Sales Index for November. The consensus is for a 0.9% increase in the index.

----- Friday, December 29th -----
9:45 AM: Chicago Purchasing Managers Index for December.