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Wednesday, January 31, 2024

FOMC Statement: No Change to Policy

by Calculated Risk on 1/31/2024 02:00:00 PM

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

FOMC Statement:

Recent indicators suggest that economic activity has been expanding at a solid pace. Job gains have moderated since early last year but remain strong, and the unemployment rate has remained low. Inflation has eased over the past year but remains elevated.

The Committee seeks to achieve maximum employment and inflation at the rate of 2 percent over the longer run. The Committee judges that the risks to achieving its employment and inflation goals are moving into better balance. The economic outlook is uncertain, and the Committee remains highly attentive to inflation risks.

In support of its goals, the Committee decided to maintain the target range for the federal funds rate at 5-1/4 to 5-1/2 percent. In considering any adjustments to the target range for the federal funds rate, the Committee will carefully assess incoming data, the evolving outlook, and the balance of risks. The Committee does not expect it will be appropriate to reduce the target range until it has gained greater confidence that inflation is moving sustainably toward 2 percent. In addition, the Committee will continue reducing its holdings of Treasury securities and agency debt and agency mortgage-backed securities, as described in its previously announced plans. 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 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; Thomas I. Barkin; Michael S. Barr; Raphael W. Bostic; Michelle W. Bowman; Lisa D. Cook; Mary C. Daly; Philip N. Jefferson; Adriana D. Kugler; Loretta J. Mester; and Christopher J. Waller.
emphasis added

ADP: Private Employment Increased 107,000 in January

by Calculated Risk on 1/31/2024 08:30:00 AM

From ADP: ADP National Employment Report: Private Sector Employment Increased by 107,000 Jobs in January; Annual Pay was Up 5.2%

Private sector employment increased by 107,000 jobs in January and annual pay was up 5.2 percent year-over-year, according to the January ADP® National Employment ReportTM produced by the ADP Research Institute® in collaboration with the Stanford Digital Economy Lab (“Stanford Lab”). The ADP National Employment Report is an independent measure and high-frequency view of the private-sector labor market based on actual, anonymized payroll data of more than 25 million U.S. employees.
...
“Progress on inflation has brightened the economic picture despite a slowdown in hiring and pay,” said Nela Richardson, chief economist, ADP. “Wages adjusted for inflation have improved over the past six months, and the economy looks like it's headed toward a soft landing in the U.S. and globally.”
emphasis added
This was below the consensus forecast of 130,000. The BLS report will be released Friday, and the consensus is for 162 thousand non-farm payroll jobs added in January.

MBA: Mortgage Applications Decreased in Weekly Survey

by Calculated Risk on 1/31/2024 07:00:00 AM

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

Mortgage applications decreased 7.2 percent from one week earlier, according to data from the Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending January 26, 2024. Last week’s results included an adjustment to account for the MLK holiday.

The Market Composite Index, a measure of mortgage loan application volume, decreased 7.2 percent on a seasonally adjusted basis from one week earlier. On an unadjusted basis, the Index increased 8 percent compared with the previous week. The Refinance Index increased 2 percent from the previous week and was 3 percent higher than the same week one year ago. The seasonally adjusted Purchase Index decreased 11 percent from one week earlier. The unadjusted Purchase Index increased 6 percent compared with the previous week and was 20 percent lower than the same week one year ago.

“Mortgage rates changed little last week, with the 30-year fixed rate at 6.78 percent, which is close to where it has been for the past month, but lower than the recent peak of 7.9 percent in October 2023,” said Joel Kan, MBA’s Vice President and Deputy Chief Economist. “Applications decreased compared to a holiday-adjusted week, driven by a decline in purchase applications that offset a slight increase in refinance activity. Low existing housing supply is limiting options for prospective buyers and is keeping home-price growth elevated, resulting in a one-two punch that continues to constrain home purchase activity. The average loan size for purchase applications has picked up in recent weeks to $444,100, the largest average loan size since May 2022.”
...
The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances ($726,200 or less) remained unchanged at 6.78 percent, with points increasing to 0.65 from 0.63 (including the origination fee) for 80 percent loan-to-value ratio (LTV) loans.
emphasis added
Mortgage Purchase IndexClick on graph for larger image.

The first graph shows the MBA mortgage purchase index.

According to the MBA, purchase activity is down 20% year-over-year unadjusted.  

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

Purchase application activity is up from the lows in late October and early November, but still close to the lowest levels during the housing bust.

Mortgage Refinance Index
The second graph shows the refinance index since 1990.

With higher mortgage rates, the refinance index declined sharply in 2022, and even with some recent increases, activity is barely off the bottom.

Tuesday, January 30, 2024

Wednesday: FOMC Statement, ADP Employment, Chicago PMI

by Calculated Risk on 1/30/2024 08:12:00 PM

Mortgage Rates 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 January. This report is for private payrolls only (no government). The consensus is for 130,000 payroll jobs added in January, down from 164,000 added in December.

• At 9:45 AM: Chicago Purchasing Managers Index for January. The consensus is for a reading of 48.0, up from 46.9 in December.

• At 2:00 PM: FOMC Meeting Announcement. No change to policy is expected.

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

Fannie and Freddie: Single Family Serious Delinquency Rate Increased Slightly, Multi-family Unchanged in December

by Calculated Risk on 1/30/2024 04:29:00 PM

Today, in the Calculated Risk Real Estate Newsletter: Fannie and Freddie: Single Family Serious Delinquency Rate Increased Slightly, Multi-family Unchanged in December

Brief excerpt:

Single-family serious delinquencies increased slightly in December, and multi-family serious delinquencies were unchanged.
...
Freddie Multi-Family Seriously Delinquent RateFreddie Mac reports that the multi-family delinquencies rate was unchanged at 0.28% in December, and up from 0.12% in December 2022.

This graph shows the Freddie multi-family serious delinquency rate since 2012. Rates were still high in 2012 following the housing bust and financial crisis.

The multi-family rate increased following the pandemic and has increased recently as rent growth has slowed, vacancy rates have increased, and borrowing rates have increased sharply. This will be something to watch as more apartments come on the market.
There is much more in the article.

HVS: Q4 2023 Homeownership and Vacancy Rates

by Calculated Risk on 1/30/2024 12:56:00 PM

The Census Bureau released the Residential Vacancies and Homeownership report for Q4 2023 today.

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 fourth quarter 2023 were 6.6 percent for rental housing and 0.9 percent for homeowner housing. The rental vacancy rate was higher than the rate in the fourth quarter 2022 (5.8 percent) and virtually the same as the rate in the third quarter 2023 (6.6 percent).

The homeowner vacancy rate of 0.9 percent was not statistically different than the rate in the fourth quarter 2022 (0.8 percent) and not statistically different from the rate in the third quarter 2023 (0.8 percent).

The homeownership rate of 65.7 percent was not statistically different from the rate in the fourth quarter 2022 (65.9 percent) and not statistically different from the rate in the third quarter 2023 (66.0 percent).
emphasis added
Homeownership Rate Click on graph for larger image.

The Red dots are the decennial Census homeownership rates for April 1st, 1990, 2000, 2010, and 2020. 

The HVS homeownership rate decreased to 65.7% in Q4, from 66.0% in Q3.  

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


Homeowner Vacancy RateThe HVS homeowner vacancy increased to 0.9% in Q4 from 0.8% in Q3.

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

The homeowner vacancy rate declined sharply during the pandemic and includes homes that are vacant and for sale (so this mirrors the low levels of existing home inventory).



Rental Vacancy RateThe rental vacancy rate was unchanged at 6.6% in Q4 from 6.6% in Q3.  This is up from 5.8% in Q4 2022.

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

Comments on November Case-Shiller and FHFA House Prices

by Calculated Risk on 1/30/2024 10:08:00 AM

Today, in the Calculated Risk Real Estate Newsletter: Case-Shiller: National House Price Index Up 5.1% year-over-year in November

Excerpt:

S&P/Case-Shiller released the monthly Home Price Indices for November ("November" is a 3-month average of September, October and November closing prices). November closing prices include some contracts signed in July, 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).

Case-Shiller MoM House PricesThe MoM increase in the seasonally adjusted Case-Shiller National Index was at 0.24%. This was the ninth consecutive MoM increase, but the smallest increase since February 2023.

On a seasonally adjusted basis, prices increased in 14 of the 20 Case-Shiller cities on a month-to-month basis. Seasonally adjusted, San Francisco has fallen 8.8% from the recent peak, Seattle is down 7.2% from the peak, Portland down 4.5%, and Phoenix is down 3.4%.
There is much more in the article.

BLS: Job Openings Little Changed at 9.0 million in December

by Calculated Risk on 1/30/2024 10:00:00 AM

From the BLS: Job Openings and Labor Turnover Summary

The number of job openings changed little at 9.0 million on the last business day of December, the U.S. Bureau of Labor Statistics reported today. Over the month, the number of hires and total separations were little changed at 5.6 million and 5.4 million, respectively. Within separations, quits (3.4 million) and 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 December; the employment report this Friday will be for January.

Job Openings and Labor Turnover Survey 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 increased in December to 9.03 million from 8.93 million in November.

The number of job openings (black) were down 20% year-over-year. 

Quits were down 17% year-over-year. These are voluntary separations. (See light blue columns at bottom of graph for trend for "quits").

Case-Shiller: National House Price Index Up 5.1% year-over-year in November

by Calculated Risk on 1/30/2024 09:00:00 AM

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

The S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index, covering all nine U.S. census divisions, reported a 5.1% annual gain in November, up from a 4.7% rise in the previous month. The 10-City Composite showed an increase of 6.2%, up from a 5.7% increase in the previous month. The 20-City Composite posted a year-over-year increase of 5.4%, up from a 4.9% increase in the previous month. Once again, Detroit reported the highest year-over-year gain among the 20 cities with an 8.2% increase in November, followed again by San Diego with an 8% increase. For the third month in a row, Portland fell 0.7% and remained the only city reporting lower prices in November versus a year ago.
...
For the first time since January 2023, the U.S. National Index and 20-City Composite posted 0.2% month-over-month decreases in November, while the 10-City Composite posted a 0.1% decrease.

After seasonal adjustment, the U.S. National Index and the 10-City Composite posted month-overmonth increases of 0.2%, while the 20-City Composite posted a month-over-month increase of 0.1%.

“U.S. home prices edged downward from their all-time high in November,” says Brian D. Luke, Head of Commodities, Real & Digital Assets at S&P DJI. “The streak of nine monthly gains ended in November, setting the index back to levels last seen over the summer months. Seattle and San Francisco reported the largest monthly declines, falling 1.4% and 1.3%, respectively.”

“November’s year-over-year gain saw the largest growth in U.S. home prices in 2023, with our National Composite rising 5.1% and the 10-city index rising 6.2%. Detroit held its position as the best performing market for the third month in a row, accelerating to an 8.2% gain. San Diego notched an 8% annual gain, retaining its second spot in the nation. Barring a late surge from another market, those cities will vie for the ‘housing market of the year’ as the best performing city in our composite.”

“Six cities registered a new all-time high in November (Miami, Tampa, Atlanta, Charlotte, New York, and Cleveland). Portland remains the lone market in annual decline. The Northeast and Midwest recorded the largest gains with returns of 6.4% and 6.3%, respectively. Other regions are not far behind with the slowest gains in the West of 3%. This month’s report revealed the narrowest spread of performance across the nation since the first quarter of 2021.”
Case-Shiller House Prices Indices 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 0.2% in November (SA) and is at a new all-time high.

The Composite 20 index is up 0.1% (SA) in November and is also at a new all-time high.

The National index is up 0.2% (SA) in November and is also at a new all-time high.

Case-Shiller House Prices Indices The second graph shows the year-over-year change in all three indices.

The Composite 10 SA is up 6.2% year-over-year.  The Composite 20 SA is up 5.4% year-over-year.

The National index SA is up 5.1% year-over-year.

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

Monday, January 29, 2024

Tuesday: Case-Shiller House Prices, Job Openings, Housing Vacancies and Homeownership

by Calculated Risk on 1/29/2024 07:52:00 PM

Mortgage Rates From Matthew Graham at Mortgage News Daily: Nice Calm Day For Rates, But Volatility Potential Increases From Here

From here, the next thing that makes great sense is for rates to follow the guidance of the incoming economic data first and foremost. Comments from the Federal Reserve will be a supporting actor until the March Fed meeting.

In other words, we have a Fed meeting coming up in 2 days and we DON'T expect there to be any major fireworks. This week's only pyrotechnic potential comes in the form of several key economic reports in addition to the Treasury department's update on its borrowing needs. [30 year fixed 6.88%]
emphasis added
Tuesday:
• At 9:00 AM ET, FHFA House Price Index for November. 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 November. The consensus is for a 5.8% year-over-year increase.

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

• Also at 10:00 AM, The Q4 Housing Vacancies and Homeownership report from the Census Bureau.